Powering Reform: Tajikistan Sets New Course for Barki Tojik

On September 16, 2025, the Government of the Republic of Tajikistan enacted Decree No. 477, a landmark directive for the comprehensive financial and operational reform of the state-owned energy utility, the Open Joint-Stock Company "Barki Tojik" (JSC "Barki Tojik").

The decree's core objective is to ensure the company's financial sustainability, enhance corporate governance, and transform it into a modern, transparent, and viable entity.

The decree introduces a multi-faceted reform agenda that addresses historical issues of debt, operational inefficiency, and a lack of transparency by imposing a new, highly prescriptive framework. The most critical mandates include:

1. Payment Prioritization: The decree establishes a legally binding, tiered system for the allocation of all incoming funds. Salaries and taxes are the highest priority, followed by payments to key domestic electricity generators (JSC "Rogun HPP" and the Sangtuda Hydroelectric Power Plants), debt service obligations, and finally, other operational and capital expenses.
2. Financial Targets: The decree sets aggressive, quantifiable performance goals designed to force a rapid financial turnaround. Key targets include achieving a minimum EBITDA of 35% of total annual revenue, a positive Free Cash Flow (FCF) by the 2029 financial year, and a Debt Service Coverage Ratio of at least 2.0x from 2027 onwards.
3. Enhanced Governance and Accountability: The decree significantly centralizes control by strengthening the oversight powers of the Supervisory Board and the Ministry of Finance. All major payments exceeding 1,000,000 Tajik Somoni are subject to a joint approval process, and the General Director is held personally responsible for compliance. All financial transactions must be conducted exclusively through bank transfers, a direct measure to eliminate cash-based, unaccountable expenditures.
4. International Standards: The company is required to prepare its financial statements in accordance with International Financial Reporting Standards (IFRS) and submit to annual audits by internationally recognized firms, explicitly mentioning Deloitte, EY, KPMG, or PWC. The decree also sets strict deadlines for the implementation of a range of ISO standards, including those for quality management (ISO 9001), risk management (ISO 31000), and innovation (ISO 56000), along with a full-scale Enterprise Resource Planning (ERP) system by the end of 2026.

The decree represents a high-stakes, government-mandated intervention designed to prevent further financial and operational degradation of a critical state asset. Its success is highly contingent on the company's ability to navigate the complex and aggressive implementation timelines, which require new leadership and a new corporate culture. The decree's successful implementation will not only secure Tajikistan's energy future but also signal its commitment to transparency and modern corporate governance.

Summary of Key Financial and Operational Targets 

The Regulatory and Strategic Framework

The Government of the Republic of Tajikistan's Decree No. 477, dated September 16, 2025, legally establishes the "Procedure for the Priority Use of Funds Received by the Open Joint-Stock Company 'Barki Tojik'".¹ The decree is a direct response to deep-seated issues within the national electric power sector and aims to ensure "effective management of debt and risks," "strengthening and clarifying the role and functions of the Supervisory Board and the Ministry of Finance," and introducing "advanced international corporate practices".

The overarching goal is to enable the company to manage its financial affairs to generate positive free cash flow, improve its capital structure, and reduce its reliance on borrowed funds.

The decree establishes a set of non-negotiable principles that must govern the distribution and use of all funds, with a strict priority-based system for the allocation of money. Expenses must never exceed cash receipts within any given financial year, thereby eliminating the accumulation of new debt. Financial transparency is to be achieved through the publication of audited financial statements that comply with International Financial Reporting Standards (IFRS). The decree also forbids the use of funds for non-core activities, such as financing "charitable, sports, or musical" organizations, pointing to an effort to eliminate wasteful spending.

The decree provides precise definitions for a range of critical financial and operational terms, aligning them with international standards to ensure clarity and consistency. These definitions cover key metrics like EBITDA, Free Cash Flow (FCF), and Debt Service Coverage Ratio, as well as roles such as the Supervisory Board and the Regulator.

Financial Framework and Performance Targets

The decree fundamentally restructures the company's financial planning and control mechanisms. JSC "Barki Tojik" is now required to prepare not only an annual budget but also multi-year, rolling five-year budgets and strategic plans, which must be approved by the Supervisory Board at least 30 days before the start of each financial year.

All expenses must be explicitly forecasted and fully reflected in the approved budget, and the company is forbidden from reallocating funds between budget line items without Supervisory Board approval.

The decree prohibits any budget adjustments that would lead to expenses exceeding cash receipts or a failure to meet financial obligations. All financial operations must be conducted exclusively through bank transfers, and the use of cash is strictly prohibited.

The following legally binding quantitative performance targets have been established:

• EBITDA: No less than 35% of the company's total annual revenue starting in 2026.
• Free Cash Flow (FCF): Non-negative (0) in 2028 and a positive FCF of at least 10% of revenue from 2029 onward.
• Debt Service Coverage Ratio (DSCR): At least 1.0x starting in 2026 and 2.0x from 2027 onward.
• Operational Metrics:
• Average accounts receivable must not exceed 45 days,
• Cost of goods sold (COGS) must not exceed 88% of annual revenue in 2025.
• Capital expenditures (CAPEX) must not exceed 10% of annual revenue.

Operational and Corporate Governance Reforms

The decree systematically reduces the operational autonomy of JSC "Barki Tojik's" management by centralizing control under the Supervisory Board and the Ministry of Finance.

All individual invoices exceeding 1,000,000 Tajik Somoni require prior approval from the Ministry of Finance. The General Director is made personally responsible for ensuring strict compliance with procurement procedures.

The company must prepare its financial statements in accordance with IFRS, and annual audits. Monthly, quarterly, and annual budget performance reviews are required to ensure continuous oversight.

To professionalize leadership, the decree sets strict qualification requirements for senior management. The General Director must have a Master's degree or equivalent in a technical, engineering, finance, or business field with significant management experience. The Deputy General Director for Financial Affairs and the Chief Accountant must hold a Master's degree in finance or accounting and be CIPA/CAP certified. The decree also mandates a comprehensive overhaul of the human resources department to focus on staff restructuring rather than increasing headcount.

Fund Management and Payment Prioritization

A central pillar of the decree is the establishment of a clear, legally mandated order for the use of all funds entering JSC "Barki Tojik." This payment priority scheme is a strategic tool for financial stabilization, ensuring that critical obligations are met sequentially:

• First Priority: Salaries and tax obligations.
• Second Priority: Payments to domestic electricity suppliers, in the order of JSC "Rogun HPP" followed by Sangtuda-1 and Sangtuda-2 HPPs.
• Third Priority: Debt obligations to the Ministry of Finance and commercial banks.
• Fourth Priority: Payments to other financial creditors and fuel suppliers.

Only after these priority obligations have been fulfilled can the remaining funds be used for all other operational and capital expenses.

The decree provides specific instructions for handling foreign currency earnings from electricity exports and funds from other programs like the Financial Recovery of the Energy Sector. These funds must be used first to service long-term, foreign-denominated debt and other foreign currency payment obligations. The decree also mandates a proactive approach to the company's debt burden. Within two months, JSC "Barki Tojik" must develop a detailed debt management strategy, which must include a plan to renegotiate existing debt terms, such as extending maturity dates, reducing interest rates, or seeking partial debt write-offs.

Implementation of Modern Systems and International Standards

In an effort to modernize its internal processes and improve efficiency, the decree mandates a full-scale digital transformation. The company is required to implement a comprehensive Enterprise Resource Planning (ERP) system, with a full rollout scheduled by December 31, 2026. The ERP system must include integrated modules for budget planning, procurement, inventory management, cash management, and reporting.

The decree also includes a series of specific deadlines for the implementation of globally recognized ISO standards:

• ISO 9001 (Quality Management): By August 31, 2027.
• ISO 56000 (Innovation Management): By August 31, 2028.
• ISO 31000 (Risk Management): By December 31, 2027.
• ISO 14001/26000 (Environmental/Social Responsibility): To be progressively integrated by June 30, 2027.

These mandates are a key step in transforming the company into a modern, credible institution and are necessary to attract international partners and investors.

Summary of Key Implementation Deadlines 

 Strategic Outlook

The successful implementation of this decree holds immense potential. A financially stable and efficient JSC "Barki Tojik" would not only secure the national energy supply but also enhance its creditworthiness, attract foreign investment, and serve as a model for other state-owned enterprises in Tajikistan. However, the decree sets extremely ambitious targets and aggressive deadlines, which will require a massive, coordinated effort and a profound shift in corporate culture. Its success will be a crucial indicator of Tajikistan's broader economic and institutional modernization.