Sri Lanka’s cash-strapped government on Tuesday announced a taxation overhaul to boost revenue amid the country’s crippling economic crisis, hiking value added taxes and corporate income tax, and slashing the relief given to individual taxpayers.

Prime Minister Ranil Wickremesinghe, who took office this month and plans to present an interim budget within weeks, said measures were necessary as the current state of government finances was unsustainable.

“The implementation of a strong fiscal consolidation plan is imperative through revenue enhancement as well as expenditure rationalisation measures in 2022,” Wickremesinghe’s office said in a statement.

Sri Lanka’s inflation rose to 39.1 per cent in May, its statistics office said on Tuesday — a record level, compared to the previous high of 29.8 per cent set in April.

An increase in VAT to 12 per cent from 8 per cent with immediate effect is among the key tax increases announced on Tuesday.