Ugandan President Yoweri Museveni has signed the "Protection of Sovereignty" law aimed at curbing foreign influence, after parliament softened provisions that had drawn criticism from financial institutions and development partners.

The legislation criminalizes promoting the "interests of a foreigner against the interests of Uganda" and bars individuals acting on behalf of foreign interests from developing or implementing policy without government approval.

Offenders face penalties of up to 10 years in prison and hefty fines.

The final version eases earlier clauses, including one that would have required all recipients of foreign funds to register as foreign agents. That requirement, now applies only to those receiving money for political activity deemed to advance foreign interests.

Rights groups warn the broad wording could be used to criminalize legitimate political opposition, while the government has dismissed the criticism as exaggerated. 

Museveni, who has ruled since 1986, has repeatedly accused foreign actors of interfering in Uganda's politics and backing domestic rivals.

Financial institutions had raised concerns that the original bill could deter remittances and development work, a key source of foreign exchange for Uganda.

Central Bank Governor Michael Atingi-Ego previously warned the law could reduce financial inflows and weaken reserves, describing the potential impact as an "economic disaster". The World Bank also cautioned the earlier draft could expose routine development activities to criminal liability.