Incentives dangled for inflation-taming city halls

Korea will grant more incentives to municipal governments for their antiinflation efforts in a bid to encourage their cooperation in keeping rising prices from hurting the nation’s overall economy, the top economic policy maker said yesterday.

The nation has been wrestling with high inflation for the last year, mostly driven by rising oil and food prices. For 2011, consumer prices jumped 4 percent from a year earlier, hitting the upper ceiling of the central bank’s target band of 2 percent to 4 percent.

“We will significantly increase incentives for municipal governments that are deemed to have done an outstanding job in terms of helping stabilize prices,” Finance Minister Bahk Jae-wan said at an anti-inflation meeting in central Seoul.

He added that providing more incentives is a “meaningful” action intended to support local government’s price stabilization efforts “in a market-friendly manner.”

Under the plan, the central government will raise the amount of fiscal incentives set aside for the purpose to 100 billion won ($88.6 million) from 60 billion won, officials said.

The move comes amid growing concern that municipalities might be raising their public service charges after Seoul recently decided to hike public transportation fares.

Bahk has expressed concerns that fare hikes for buses and subways in the nation’s capital could prompt other regional governments to follow suit, possibly exerting more inflationary pressure. As for high gasoline prices at pumps in the capital, a major inflation-fueling factor, Bahk vowed to continue pushing for price declines by boosting competition among stations. Yonhap