DAR ES SALAAM (Reuters) - Tanzania has banned sugar exports in a series of measures to tame spiralling prices that have fuelled inflation in east Africa's second-biggest economy, local media said on Wednesday. The government also announced a tarrif-free import quota of 120,000 tonnes of sugar over the next three months to fill a supply gap. "The shortage has been caused by the smuggling of sugar to Kenya and Uganda," Tanzania's state-run Daily News newspaper quoted the permanent secretary of the ministry of agriculture, Mohamed Muya, as saying. He said smugglers ferret the sweetener illegally across the border to neighbouring countries where they fetch higher prices. "It is a very complicated issue given Tanzania's porous borders coupled with the existence of the East African Community (EAC) common market," he said. "While a kilogramme of sugar is sold at an average price of 2,500 Tanzanian shillings in the local market, it fetches (the equivalent) of 4,000 shillings and 3,500 shillings per kilo in Kenya and Uganda respectively." The government announced in May it had halted food exports to curb rising prices of staple goods. Rising food and fuel prices pushed Tanzania's inflation rate to 13 percent in July from 10.90 percent in the previous month. Tanzania consumes most of its sugar but traders also export the commodity to its regional neighbours. The state-run Sugar Board of Tanzania places strict quotas of imports of the sweetener in an effort to protect local industries, stabilize prices and ensure supply. Tanzania expects sugar output to rise 17.5 percent in the 2010/11 cycle to 310,000 tonnes against an annual demand of 480,000 tonnes.