A billion-dollar industry, on whose existence many ordinary lives are anchored, faces its most potent threat as Uganda prepares to introduce a controversial law that will give the government sweeping powers to determine who can receive money from abroad, the amount they can get, and what that money can do.
The Protection of Sovereignty Bill 2026, a draft piece of legislation that remains hidden from public view, and whose ownership has split government ministries, has placed the diplomatic corps on tenterhooks, with some of them warning that if the bill is passed in its current form, they are ready to pack up their bags and leave, according to credible sources.
Government says the bill is meant to protect the sovereignty of the people of Uganda; create a department to regulate the activities of “agents of foreigners”; and regulate funding and any other assistance to agents of foreigners.
The bill is yet to be tabled for debate in Parliament, where it is expected to be rubberstamped due to the ruling party’s majority number, with no clear indication of when it will appear on the parliamentary order paper.
At the moment, government ministries are divided on who should own the bill and present it to Parliament. Sources say government is split between the ministry of Internal Affairs on one side and the ministry of Security together with the Office of the President on the other, over who to hand the honours of tabling the bill.
That uncertainty has only heightened the anxiety within the market – from the diplomatic circles to the banking sector. Seen through a narrow lense, the bill is a deliberate attempt to curtail the activities of the Non-Government Organisations, who have on numerous occasions been labelled “agents of foreigners.”
For many NGOs in Uganda, the timing of this bill could not have come at a worse time. The suspension of the €110 million Democratic Governance Facility in early 2001, and the winding up of USAID activities worth more than $300 million in January 2025, have forced many NGOs in Uganda to either close shop or trim their staff and operational expenses in order to navigate through a shrinking pool of donor funds.
But when interpreted with a broader perspective, the bill hits at the core of Uganda’s economy; it has the ability to ravage the currency markets, wipe out a sizeable share of the foreign reserves, blow up a big part of the country’s tax revenue source, and trigger a spike in the cost of living for ordinary Ugandans.
“While the stated aim, protecting national sovereignty from undue foreign interference, is a legitimate objective shared by many jurisdictions, the Bill goes far beyond comparable legislation in other countries,” Phillip Karugaba, a partner at the law firm, ENS Africa, wrote recently.
“Its reach extends well beyond political lobbying and into the heart of ordinary commercial activity, foreign investment, development finance and the exercise of fundamental rights,” he added.
It is the definition of who an agent of a foreigner is that should concern any Ugandan. The bill defines “agent of a foreigner” as a person who acts as an agent, representative, employee or servant, or any person who acts in any other capacity at the order, request, or under the direction or control of a foreigner or of a person, any of whose activities are directly or indirectly supervised, directed, controlled, financed, or subsidised by a foreigner.
The bill then defines a foreigner as a non-Ugandan citizen, a Ugandan citizen residing outside Uganda, foreign institutions, diplomatic establishments such as embassies and consulates, or any person that the minister might declare to be a foreigner.
It is on just these two all-encompassing definitions – and there are more of such wild clauses in the draft – that this bill has the kind of force to turn different pockets of Uganda’s economic marketplace into scenes of absolute carnage.
In designating any Ugandan living abroad as a potential foreigner, the bill takes aim at a critical pulse of Uganda’s economy – the workers’ remittances. With many Ugandans living abroad sending money back home to pay for school fees and clear hospital bills for relatives, workers remittances account for the second largest export that the country records, only behind gold.
According to a recent press statement by IFAD, a global fund targeting agriculture and rural economies, announcing its partnership with Bank of Uganda to create a new dashboard to track the money Ugandans send back home, remittance inflows hit a record $2.5 billion in 2025, equivalent to approximately 3.8 per cent of Gross Domestic Product.
The statement added that Uganda recorded more than 16 million remittance transactions in 2025, with an average value of $152. These remittances didn’t just support homes; they helped prop up the Uganda shilling too.
For example, Bloomberg tracked 23 currencies in Africa from April 2024 to April 2025 and the Uganda shilling emerged the best performing currency, according to Bank of Uganda. The bank pointed to the NGO community as part of the reasons behind the shilling’s rally.
“The performance of the Uganda shilling was supported by prudent monetary and fiscal policies, financial market reforms, and increased foreign exchange inflows from coffee exports, remittances, and NGOs that comfortably met corporate demand,” the central bank noted in its Integrated Annual Report 2024-2025.
A stable and strong currency attracts investments as it allows investors to make long term projections, influences a drop in interest rates on credit, and ultimately boosts job creation. The bill now places the remittance pool in jeopardy as those sending money back home may fear to find themselves on the wrong side of the law.
A decline in remittances could mean the glory days of Uganda’s currency are numbered. It is not just the technocrats at the central bank that see value in the remittances and inflows to NGOs; the banking system sees this pool of money as a life-blood.
Nearly all the commercial banks in Uganda have a special NGO account product, where they dangle incentives to attract money. The NGO accounts attract special interest and privilege. Some of the privileges on these NGO accounts include free online banking, free cash and cheque deposits, just to mention a few.
Also, large banks have formed NGOs of their own, such as Stanbic Business Incubator Limited to support the sustainability of Small and Medium Enterprises in Uganda through capacity building and development programs.
Now, the Protection of Sovereignty Bill 2026 could hurt these revenue streams. Clause 22 of the bill imposes a cap on foreign funding of approximately Shs 400 million, or $106,000 within any twelve-month period.
Any funding above this threshold requires a written consent from the minister responsible for internal affairs. This administrative hiccup throws the future of NGOs such as Stanbic’s Business Incubator in uncertainty.
The incubator successfully enabled MSMEs to access over $20 million in financing facilities, a new record, in 2024, with more than 90 per cent as credit from Stanbic Bank, and the rest from funding partners including the NSSF Hi-Innovator Program, United States Africa Development Fund, and the Foreign and Commonwealth Development Office of the UK.
With foreign entities known to be sensitive to violating a country’s laws, it is likely many of them will pause their funding, such as the kind to Stanbic’s Incubator, until further clarity over this bill has been offered. It is at that point that this bill could boomerang on government.
According to the semi-annual budget performance report for financial year 2025/2026, which the ministry of finance released in February this year, government already recorded a decline in the Pay As You Earn tax head. According to the report, direct domestic tax collections amounted to Shs 5,881 billion, registering a shortfall of Shs 307.03 billion against a target of Shs 6,188 billion in the first half of FY2025/26.
This outcome was mainly attributed to underperformance in Pay As You Earn (PAYE), withholding taxes and corporate income tax collections, among others. The report noted that “the underperformance of PAYE was largely due to delayed PAYE remittances by some Government entities, and reduced employment levels in the Non- Governmental Organizations sector as a result of reduced donor funding following the suspension of selected USAID- supported projects, including TASO and African Initiatives for Relief and Development.”
A further slump in tax revenues will likely compromise government’s ability to service its debt burden, leaving it with the option of raising taxes. This would then result in the increase in the prices of goods and services, which would then eat into the disposable income of ordinary households.
The real estate market, an indicator of how much hot money is flowing around, will not be spared either. As the market was recovering from the impact of the Covid-19 pandemic, which saw a massive exodus of diplomats and expatriates from Uganda, the Protection of Sovereignty Bill 2026 could reverse whatever gains the sector might have made.
Already, many NGOs have either closed shop or encouraged staff to work from home, leaving owners of apartment blocks, some of whom are still servicing debts, in the dilemma of finding new tenants. In the end, the Protection of Sovereignty Bill 2026 will spare no one.
“The flaws in the Bill from a constitutional and human rights perspective are glaring and the likely impact on legitimate private sector business is significant. Uganda solely needs a legal regime that supports the foreign capital inflows to help us achieve the targeted 10X GDP growth and fill our massive infrastructure funding gaps,” Karugaba advised.
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