Uganda defies World Bank and central bank warnings to enact controversial sovereignty law

Uganda has enacted a controversial new law aimed at limiting foreign influence, a move that is already raising concerns among investors, development partners, and financial institutions over its potential impact on the country’s economy.

• Uganda has passed a new law aimed at restricting foreign influence, sparking concern among investors and international partners.
• The law requires foreign agents to register with the government and criminalizes promoting foreign interests over Uganda's, with penalties including up to 10 years in prison.
• Key sectors reliant on foreign partnerships, such as banking, infrastructure, and aid, may be negatively impacted by the law's broad provisions.
• Uganda's central bank and the World Bank have warned that the law could damage investor confidence, reduce financial inflows, and harm economic growth.

President Yoweri Museveni signed the “Protection of Sovereignty” bill into law despite warnings from the country’s central bank and criticism from the World Bank.

The legislation criminalizes actions deemed to promote “the interests of a foreigner against the interests of Uganda,” while requiring foreign agents to formally register with the government.

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The law also bars individuals or organizations acting on behalf of foreign interests from participating in policy development or implementation without state approval. Violations carry penalties of up to 10 years in prison and substantial financial fines.

Investor confidence and foreign funding at risk

The law’s broad language has triggered fears that Uganda could become a less attractive destination for foreign investors, aid organizations, and international financial partners.

Central Bank Governor Michael Atingi-Ego warned that the legislation could significantly reduce financial inflows into the country, weaken investor confidence, and place additional strain on Uganda’s foreign exchange reserves.

According to Reuters, Ego described the potential outcome as an “economic disaster” for the country.

The World Bank also criticized the measure, warning that the legislation could expose routine development and humanitarian activities to criminal liability due to its wide interpretation of foreign involvement.

Analysts say the law could affect sectors heavily dependent on foreign partnerships, including banking, infrastructure, agriculture, mining, and non-governmental development programs.

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Uganda has long relied on external financing, donor support, and foreign direct investment to support economic growth, public services, and infrastructure development.

There are also concerns that stricter oversight of foreign-linked activities may slow policy collaboration with international institutions and create regulatory uncertainty for multinational companies operating in the country.

The legislation comes at a delicate time for Uganda’s economy as the country seeks to attract more foreign investment into its oil, mining, and industrial sectors while managing growing fiscal and external financing pressures.