April 29 (Bloomberg) -- Tanzania raised its inflation target because of increasing oil and food costs, while highlighting that a bumper crop may prevent price growth from accelerating further.

The east African nation is targeting inflation of 7 percent by June, compared with an earlier objective of 6.5 percent, Finance Minister Mustafa Mkulo said in an interview today in the northern city of Arusha.

While corn prices have doubled in the east African country this year, ``rising food prices aren't alarming for Tanzania because we are producing most of that food ourselves,'' he said.

Food prices in Tanzania have increased because of shortages in isolated districts that are difficult to access, and low stocks before the start of the annual harvest next month. Improved rainfall in key crop-growing areas should result in a higher output of corn, rice and beans, the nation's staples, in most parts of the country this year, Mkulo said.

Annual inflation in Tanzania accelerated to 9 percent in March, from 8.9 percent in February, as food prices climbed 11.2 percent in the year, according to data released by the National Bureau of Statistics last week.

Rising food prices are creating the biggest challenge the UN World Food Program has faced in its 45-year history, ``threatening to plunge more than 100 million people on every continent into hunger,'' the agency said on April 22. Global food prices surged 57 percent last month from a year earlier, according to the UN, and the World Bank warns civil disturbances may be triggered by rising food prices in 33 countries.

Shortages, Hunger

Tanzania's ability to meet domestic consumption needs may shield it from the type of food shortages and hunger affecting other parts of the developing world, such as Haiti and Egypt, Mkulo said. The country will announce measures in the budget to boost agricultural productivity, including subsidies for fertilizer and other farm inputs, he said.

The country's economy will expand 7.3 percent in the year through June, 7.8 percent in the 12 months through June 2009 and as much as 9.2 percent in the year through June 2011, Mkulo said. He wouldn't provide reasons for the expected acceleration in growth, saying only that details will be announced in the national budget to be published in the week of June 10.

``If we reach that, we think our plan on the Millennium Development Goals might be achieved,'' Mkulo said.

The Millennium Development Goals are United Nations-backed targets that include halving extreme poverty and halting the spread of the HIV virus by 2015.

To contact the reporter on this story: Sarah McGregor in Dar es Salaam via Johannesburg at pmrichardson@bloomberg.net.

Last Updated: April 29, 2008 06:27 EDT