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DAR ES SALAAM (Reuters) - Tanzania's economy expanded by 6 percent in 2009, beating a forecast for 5.0-5.5 percent growth, and should grow by 7 percent this year, the east African country's finance minister said.

Finance Minister Mustafa Mkulo gave the figures to a parliamentary committee on finance and economic affairs late on Friday. A report of the session was seen by Reuters on Saturday.

The 6 percent economic expansion in 2009 was down from growth of 7.4 percent in 2008.

Like its east African neighbours, Tanzania's economy was hurt by the fallout from the financial crisis hitting demand for exports and tourism in late 2008 and the early part of 2009.

It had also been suffering from a prolonged drought that weighed on agricultural output and energy production.

But improved rains have since boosted harvests. Increased output from gold mines in Africa's third-largest producer also helped growth accelerate in the second half of 2009.

Analysts say continued gains in these sectors, along with higher government spending ahead of a presidential election in October, should help sustain growth rates in 2010.

Tanzania's previous forecast for 2010 growth was 5.7 percent, Mkulo said, adding that growth rates should pick up to 7.1 percent in 2011, 7.4 in 2012 and 7.8 in 2013.

The minister also said Tanzania's inflation rate should slow to 8 percent in June 2010, missing an an earlier 6 percent forecast because of higher food and fuel prices.

But he said Tanzania expected better harvests in the region and improved currency exchange rates to lower the cost of food and other imports in the coming months.

Tanzania's year-on-year inflation rate stood at 9.4 percent in April, down from an average annual rate of 12.1 percent in 2009 and 10.3 percent in 2008.

INFRASTRUCTURE INVESTMENT

Mkulo said the government plans to boost domestic revenue collection to 17.3 percent of gross domestic product in the 2010/11 financial year that starts in July from the current target of 16.4 percent and raise it to 17.6 percent in 2012/13.

Donors have slashed funding pledges for Tanzania's 2010/11 budget by nearly a quarter of a billion dollars to $534 million due to concerns about the slow pace of reforms in the country.

The east African nation of 40.7 million people is among the continent's biggest per capita aid recipients. Foreign assistance made up 33 percent of Tanzania's 2009/10 budget and hard currency donor inflows help support the currency.

Mkulo said in 2010/11, the government will give priority to agriculture, livestock development, infrastructure, land reforms, energy and the introduction of national identity cards.

"The government will upgrade rail and road networks, build a new port and rehabilitate existing ports. The government will also upgrade its airports to turn Tanzania into a regional and international hub for trade and transportation," he said.

The minister said the country attracted $650 million in foreign direct investment last year, a 14.5 percent decrease compared with the previous year due to the financial crisis.

He also said the government would target gross official reserves equivalent to a minimum of 5 months of import cover.