BoU Uganda: Protection of Sovereignty Act Not Causing Shilling Depreciation

• The Bank of Uganda (BoU) has rejected claims that the Protection of Sovereignty Act, 2026, caused the shilling's depreciation.
• BoU Governor Michael Atingi-Ego stated that the currency's weakness stems from economic fundamentals.
• Key factors cited for the shilling's fall include a widening current account deficit.
• Reduced portfolio investment inflows are also identified as a significant contributor to the currency's decline.
• President Yoweri Museveni previously signed the Protection of Sovereignty Act into law.

Governor Michael Atingi-Ego explicitly dismissed such assertions, clarifying the central bank's position on the currency's performance.

The Bank of Uganda (BoU) has officially refuted claims suggesting that the recently enacted Protection of Sovereignty Act, 2026, is a contributing factor to the ongoing depreciation of the Uganda shilling. Governor Michael Atingi-Ego explicitly dismissed such assertions, clarifying the central bank's position on the currency's performance.

Instead of legislative measures, the BoU attributes the weakening of the national currency to fundamental macroeconomic pressures. This stance provides a clear directive for economic analysis, shifting focus away from specific legal instruments like the BoU Uganda shilling Protection of Sovereignty Act and towards core economic indicators.

The Protection of Sovereignty Act, 2026, was formally signed into law by President Yoweri Museveni, marking its official integration into Uganda's legal framework. While the specifics of the Act's provisions were not detailed in the central bank's statement, its passage appears to have generated some public discussion regarding its potential economic ramifications, particularly concerning the stability of the Uganda shilling.

Despite any public speculation, the central bank's leadership, through Governor Atingi-Ego, has sought to delineate the actual drivers of the Uganda current account deficit impact on the national currency. This clarification is crucial for understanding the official economic narrative surrounding the Protection of Sovereignty Act 2026 Uganda.

Governor Michael Atingi-Ego pinpointed two primary economic factors as the true causes behind the Uganda shilling depreciation. The first is a significant widening of the nation's current account deficit, indicating that the country is importing more goods, services, and capital than it is exporting or receiving from abroad. This imbalance naturally places downward pressure on the local currency as demand for foreign exchange outstrips supply.

The second critical factor identified is a reduction in Uganda portfolio investment inflows. Such investments, which typically involve foreign purchases of domestic stocks, bonds, and other financial assets, provide crucial foreign currency to the economy. A decline in these inflows means less foreign capital entering the country, further exacerbating the supply-demand imbalance for foreign currency and contributing to the Michael Atingi-Ego currency fall. The BoU's emphasis on these macroeconomic fundamentals underscores its analytical framework for assessing currency stability.

Lawyers advising on investment or financial stability in Uganda should note the Bank of Uganda's official position that the Protection of Sovereignty Act, 2026, is not a driver of the shilling's depreciation. This clarifies the central bank's perspective on economic risk factors, directing attention to macroeconomic fundamentals like the current account deficit and investment flows rather than specific legislation for currency stability assessments.

Source: Original reporting via The Observer Media Ltd.