KAMPALA, Uganda – Uganda’s central bank warned on Wednesday that a proposed law aimed at curbing foreign political influence could trigger a flight of capital, erode foreign exchange reserves, and stoke inflationary pressures.
The Bank of Uganda (BoU) issued the warning during parliamentary hearings for “The Protection of Sovereignty Bill, 2026.” Introduced in mid-April, the legislation would require any Ugandan citizen or organization receiving funds from abroad to register as a “foreign agent,” subject to strict financial monitoring and potential restrictions on political activity.
Governor Michael Atingi-Ego, in a submission to the parliamentary committee, cautioned that the bill’s current wording is broad enough to disrupt legitimate non-governmental organization (NGO) operations and foreign direct investment.
“The uncertainty surrounding the implementation of this bill could lead to significant capital outflows,” the Governor’s statement read. ”
A contraction in foreign inflows would put immense pressure on the shilling and necessitates a tighter monetary stance to curb inflation, potentially slowing overall economic growth.”
Supporters of the bill argue it is a necessary shield against “external interference” in Uganda’s domestic affairs. However, civil society groups and international donors have voiced concerns that the law is designed to stifle dissent ahead of upcoming electoral cycles.
The Ugandan Shilling remained stable on Wednesday, though traders noted a “wait-and-see” approach among institutional investors as the hearings continue.
