Hong Nam-ki: "Fuel Tax Reduction Extended for 3 Months Until End of July... Considering Expansion of Reduction Scope" (Update)

Ministerial Meeting on Price Relations

Hong Nam-ki, Deputy Prime Minister for Economy and Minister of Economy and Finance (second from the right), is presiding over the 'Price-Related Ministers' Meeting' held at the Government Seoul Office Building on the 4th. [Image source=Yonhap News]

[Asia Economy Sejong=Reporter Son Seon-hee] The government has decided to extend the fuel tax reduction measure, which was scheduled to end at the end of April, for an additional three months until the end of July. It also plans to consider expanding the current 20% fuel tax reduction depending on future international oil price trends.

On the 4th, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, held a 'Price-related Ministers' Meeting' at the Government Seoul Office and said, "To minimize the impact of high oil prices on inflation, we will extend the 20% fuel tax reduction and the 0% tariff on liquefied natural gas (LNG) allocation, which were scheduled to end at the end of April, for three more months until the end of July." He added, "If international oil prices rise sharply beyond the current level and economic uncertainty further expands, we will also consider expanding the fuel tax reduction."

In addition, the government will promote the application of allocation tariffs and increase quantities mainly for items experiencing price and supply instability due to the recent Ukraine situation. Deputy Prime Minister Hong stated, "We will expand the allocation tariff quantities for substitute raw materials such as barley and wheat bran, increase the World Trade Organization (WTO) tariff rate quota (TRQ) for potatoes by 1,500 tons (from 175 tons to 1,675 tons), and additionally review the application of allocation tariffs for potatoes used for chips and the increase of TRQ quantities for processed peanuts." The quantity of barley will be increased from 40,000 tons to 100,000 tons, and wheat bran from 30,000 tons to 60,000 tons.

Deputy Prime Minister Hong added, "For key items with high external dependence used in semiconductor manufacturing processes such as neon and krypton, we will check the supply and demand situation and decide on the application of allocation tariffs within March."

The government will also extend temporary measures until the first half of this year, such as increasing the credit limit for non-ferrous metal market releases from 3 billion KRW to 5 billion KRW and extending the release period by three months.

Furthermore, amid a sharp rise in dining-out prices, to ease the cost burden on the processed food and dining industries, the interest rates on feed and food raw material purchase funds will be lowered by 0.5 percentage points each. The government will also exempt individual business owners struggling due to COVID-19 from the April value-added tax pre-notification. Additionally, 7 billion KRW worth of 20% discount coupons for agricultural, livestock, and fishery products will be supported in March, and supply management focusing on vegetables such as cabbage will be implemented.

According to Statistics Korea on the same day, the consumer price inflation rate last month recorded 3.7%, marking five consecutive months in the 3% range. The government's convening of the Price-related Ministers' Meeting for the first time in about five years since January 2017 appears to stem from concerns that prolonged high inflation could adversely affect the domestic economy.

Deputy Prime Minister Hong emphasized, "This is a very critical time when some are even raising concerns that the world could enter a previous 'inflation vicious cycle.' High inflation reduces real income, which can hinder people's livelihoods and economic recovery. Therefore, from a macroeconomic management perspective, it is crucial to focus on price stability in the first half of the year to block the spread of inflation expectations."

He continued, "Especially in terms of prices, since price determination occurs in a market economy with liberalization, there are limits to achieving price stability through government measures and efforts alone. I would like to take this opportunity to ask related industries to actively participate and cooperate with the government's efforts to stabilize prices by adjusting the timing and extent of price increases."

This content was produced with the assistance of AI translation services.