Sovereignty law not responsible for Uganda shilling’s fall – BoU

What the report says

Bank of Uganda Governor Michael Atingi-Ego has pushed back against claims that Uganda’s Protection of Sovereignty Act, 2026 helped drive the shilling lower. Speaking after the central bank raised its policy rate, he said the currency’s recent weakness was mainly linked to a widening current account deficit and softer portfolio investment inflows, not the new law. The Observer reported that the governor made the remarks during a press interaction in which journalists also asked about reports of large capital outflows.

The law, signed by President Yoweri Museveni in May after Parliament revised some disputed clauses, regulates the activities and foreign funding of people and organisations said to act in the interests of foreign entities. The Bank of Uganda had previously voiced concern that such restrictions could affect foreign investment, remittances and other cross-border flows. Atingi-Ego, however, said the recent depreciation was a balance-of-payments issue rather than a result of the legislation.

He pointed to worsening external accounts, including a larger goods trade deficit, a wider services deficit and a bigger primary income deficit, while noting that remittance-linked secondary income had risen. The central bank increased the Central Bank Rate from 9.75% to 12% to help contain inflation and limit further pressure on the shilling. The move may raise borrowing costs, but the governor and the bank’s research head argued that tighter policy was needed to prevent inflation and exchange-rate expectations from becoming entrenched.

Atingi-Ego also said Uganda’s debt remained sustainable based on earlier indicators, though he noted that an updated assessment had not yet been completed using the latest currency movements. The comments matter because they link exchange-rate pressure, inflation control and investor confidence at a time when businesses and households are already facing higher import costs and tighter credit.