By Ben Musanje
Uganda’s banking industry has issued a stark warning over the proposed Sovereignty Bill 2026, saying its current form could severely disrupt financial operations, scare off foreign investors, and undermine the country’s economic growth ambitions.
In a detailed submission to the Attorney General dated April 13, 2026, the Uganda Bankers Association (UBA) raised red flags about multiple clauses in the draft law, urging government to urgently revise the bill. The letter, signed by Executive Director Wilbrod Humphreys Owor, was also copied to key institutions including the Bank of Uganda, the Ministry of Finance Planning and Economic Development, Parliament, and the Ministry of Justice and Constitutional Affairs.
UBA’s concerns center on provisions they say directly conflict with the banking sector’s role in supporting government’s economic transformation agenda, particularly plans to expand private sector credit and drive tenfold GDP growth under the ATMS strategy.
One of the most contentious aspects is the bill’s sweeping definition of an “agent of a foreigner.” According to UBA, the definition is so broad that it could classify foreign-owned or partially foreign-owned banks as foreign agents simply because of their ownership structures. Correspondent banking relationships—where Ugandan banks process transactions on behalf of foreign banks—could also fall within this scope, alongside development financing routed through commercial banks.
“This creates immediate uncertainty for the entire banking system,” UBA noted, warning that normal operations could be misinterpreted as foreign agency activities.
The association also criticized Clause 22, which restricts access to foreign funding above 20,000 currency points (about UGX 400 million or USD 107,000) without ministerial approval. UBA described the threshold as “extremely low” compared to standard banking transactions, arguing that it would subject nearly all foreign capital inflows to bureaucratic clearance.
Such restrictions, they warned, could disrupt critical funding channels, including credit lines from international institutions, shareholder capital injections, and syndicated loans. The clause’s forfeiture provision—requiring unapproved funds to be surrendered to the state—was described as posing an “existential risk” to financial institutions.
Further concerns arise from Clause 25, which imposes strict obligations on supervised institutions handling cross-border transactions. Banks would be required to verify ministerial authorization before processing payments to entities deemed foreign agents and submit monthly reports to the Minister of Internal Affairs. Non-compliance could attract penalties of up to UGX 4 billion.
UBA argues that these requirements duplicate existing anti-money laundering controls overseen by the Financial Intelligence Authority, while creating parallel reporting systems that could lead to regulatory conflicts and operational inefficiencies.
The bill’s Clause 21, which mandates public disclosure of sources of foreign funding, has also sparked alarm over customer confidentiality and data protection. Bank officials warn that making such sensitive financial information publicly accessible could violate existing secrecy obligations and expose institutions to legal risks.
Meanwhile, Clause 13—the so-called “economic sabotage” provision—has raised fears of criminal liability for routine financial communications. UBA cautioned that analyst reports, investor briefings, and even internal risk assessments could be interpreted as actions that “weaken the economic system,” exposing banks and their staff to prosecution.
The bill also extends regulation to entities that influence government policy, potentially affecting industry associations, donor-funded financial sector reforms, and engagements with global institutions such as the World Bank and IMF.
UBA further highlighted Clause 14, which introduces mandatory registration for entities classified as foreign agents. This would require banks to obtain certification from the Ministry of Internal Affairs in addition to their licenses from the Bank of Uganda. The certificates, valid for only two years, could be revoked on broad grounds, creating uncertainty for long-term operations.
The association warned that, taken together, these provisions could trigger a chilling effect on foreign direct investment, strain correspondent banking relationships, and fragment regulatory oversight in Uganda’s financial sector.
Owor is now calling on government to amend the bill by carving out exemptions for licensed financial institutions, aligning oversight with existing frameworks, and reaffirming the primacy of the central bank.
Without such revisions, the bankers caution, the Sovereignty Bill risks doing more harm than good to Uganda’s economic future. (For comments on this story, get back to us on 0705579994 [WhatsApp line], 0779411734 & 041 4674611 or email us at mulengeranews@gmail.com).
