The paper presents a novel economical phase imbalanced shunt reactive compensation scheme utilizing a static synchronous compensator (STATCOM) to enhance power system stability and damp inter-area oscillations. It compares the proposed method with traditional power system stabilizers, emphasizing its cost-effectiveness and reliability, as well as the implementation of a wide-area damping controller optimized using particle swarm optimization. Various case studies conducted on a test system demonstrate the efficacy of the proposed scheme in improving power system dynamics.