In a ruling delivered on Wednesday afternoon, Grade One Magistrate Sheilah Gloria Atim dismissed key prosecution objections, finding that Matembe had satisfied the legal requirements for bail.
The magistrate held that the 73-year-old former minister and President Museveni's key ally is a well-established public figure with deep roots in Uganda and no intention of absconding from court proceedings.
She observed that Matembe is married, has a known place of residence, and found no basis to doubt that her Luzira home remains her fixed place of abode despite prosecution claims that she had gone into hiding following an alleged security operation at her residence.
Addressing the legal principles governing bail, the magistrate explained that although courts exercise discretion under Section 77 of the Magistrates Courts Act, the primary purpose of bail is to ensure an accused person attends trial without being subjected to unnecessary pre-trial detention.
The ruling came after state prosecutors had argued that Matembe was a flight risk, questioned the credibility of her sureties, challenged her failure to immediately identify their residences, and contended that her age alone was not sufficient ground for release.
The prosecution had also raised concerns over her alleged lack of a fixed place of residence and questioned the authenticity of contact details provided by some of her sureties.
However, the court found that the remaining sureties presented by the defence were substantial, credible and capable of ensuring Matembe's attendance whenever required.
The magistrate ruled that the sureties understood the legal responsibilities attached to standing for an accused person and were fit to guarantee her appearance before court.
Matembe was consequently released on a Shs3 million non-cash bail while her sureties were bonded at Shs2 million each.
The ruling prompted visible relief inside the packed courtroom, where opposition leaders, lawyers, civil society activists and family members had gathered for the hearing.
Among those present were Leader of the Opposition Joel Ssenyonyi, civil society activist Dr Sarah Bireete, and Matembe's husband, who had attended the proceedings in support of the former minister.
The decision concludes a dramatic bail hearing that followed Matembe's arraignment on Tuesday on charges of promoting sectarianism under Section 38 of the Penal Code Act over remarks she allegedly made during a television programme.
Her defence team, led by lawyer Anthony Asiimwe, had argued that Matembe's advanced age, deteriorating health, distinguished public service, and strong community ties made her a suitable candidate for bail.
The defence also alleged that she had been abducted by security operatives, held incommunicado for several days, and only produced before court after her whereabouts had remained unknown.
The case has attracted widespread public attention, with the Uganda Law Society, opposition politicians and civil society organisations raising concerns over the circumstances surrounding her arrest and prosecution.
While Matembe has now secured her temporary freedom, she is expected to return to court as her trial on the sectarianism charges proceeds.