Uganda’s central bank has warned that a proposed law requiring recipients of foreign funding to register as “foreign agents” could weaken the country’s foreign exchange reserves and trigger inflation, raising tensions over a bill already facing widespread criticism.
The proposed legislation, known as the Protection of Sovereignty Bill, 2026, is currently undergoing public hearings in parliament after being introduced on April 15. It aims to regulate external financial influence in domestic political and civic activities.
Under the draft law, any Ugandan receiving funds from abroad would be required to register with the government as a foreign agent, obtain certification, and disclose all incoming transfers. Supporters of the bill say it is intended to improve transparency and protect national sovereignty from external interference.
But the governor of the Bank of Uganda, Michael Atingi-Ego, warned that the measures could have unintended macroeconomic consequences by discouraging foreign inflows into the East African nation.
“The moment you tamper with these inflows here, we risk running down our reserves, and that is economic disaster for a country,” Atingi-Ego said in comments posted on the bank’s official social media account.
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He added that reduced inflows could pressure the exchange rate, weakening the Ugandan shilling and driving up import costs, which would ultimately feed into higher inflation.
“Because of the depreciation of the currency that is likely to occur as an unintended consequence of this bill… our inflation is going to increase via the depreciation of the exchange rate,” he said.
Uganda, like many developing economies, relies heavily on foreign currency inflows from donors, development agencies, remittances and non-governmental organisations to support its balance of payments and stabilise its currency.
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The central bank warned that any disruption to these flows could force it to draw down foreign exchange reserves more quickly than planned, reducing its ability to cushion the economy against external shocks such as global commodity price swings or financial market volatility.
The debate over the bill has also drawn international attention. The World Bank has expressed concern that the legislation could expose a broad range of development activities in Uganda to criminal liability, including meetings where policy alternatives are discussed.
Critics argue that the law could deter international organisations and development partners from operating freely in the country, potentially affecting funding for health, education and governance programmes.
Domestic opposition to the bill has also been strong. Civil society organisations, commercial banks, rights groups and opposition politicians have all raised concerns that the proposed requirements could restrict civic space and discourage legitimate financial support for non-governmental activities.
The Ugandan government, however, has dismissed the criticism, arguing that the law is necessary to safeguard national sovereignty and ensure transparency in foreign funding flows.
The proposed legislation comes at a time when Uganda is already managing macroeconomic pressures, including exchange rate volatility and inflation risks linked to global economic uncertainty.
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A weaker currency would raise the cost of imports such as fuel and industrial inputs, potentially complicating efforts by policymakers to maintain price stability. The central bank has repeatedly stressed the importance of stable foreign inflows in maintaining adequate reserve buffers.
Uganda’s economy remains heavily dependent on external financing, including multilateral development support and remittances from citizens abroad. Any policy that reduces those inflows could therefore have broad economic implications.
For now, the bill remains under parliamentary review, with public hearings expected to continue in the coming weeks. Analysts say the outcome will be closely watched by investors and development partners concerned about regulatory uncertainty and its impact on economic stability.
