* Year-on-year inflation in December at lowest for 2012
* African country plagued by high inflation in past four years
By Aaron Maasho
ADDIS ABABA, Jan 9 (Reuters) - Ethiopian inflation dropped in December to 12.9 percent year-on-year, its lowest rate of 2012, official data showed on Wednesday.
The government had targeted single-digit inflation in 2012, something it now hopes to achieve this year.
Inflation, which has been billed by the IMF as the country's biggest economic challenge, peaked at 36.3 percent last February, and has steadily declined due to rising agricultural output and government subsidies on a number of food items.
Last month's year-on-year inflation fell to 12.9 percent from 15.6 percent in November, according to the Central Statistics Agency.
It said the consumer price index actually fell 0.7 percent month-on-month in December after a 0.5 percent drop in November.
The agency said food price inflation fell to 11.8 percent year-on-year in December, down from 13.4 percent in November. The non-food inflation rate also dropped to 14.6 percent in December from 19.4 percent the previous month.
The International Monetary Fund has said inflation is the biggest challenge facing policymakers in the Horn of Africa country, which has however registered one of the world's highest economic growth rates for the last few years.
Ethiopia's economy is expected to maintain a growth rate of 11 percent in 2012/2013, the seventh consecutive fiscal year of growth, according to senior officials.
High coffee earnings in the past few years have boosted the economy of Africa's biggest coffee producer, as have rising gold, oil seed and livestock exports.
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