Ethiopia has started to divert the flow of the Blue Nile river to construct a giant dam to meet its energy needs, according to state media, amid concerns from other Nile-dependent countries downstream.

Demeke Mekonnen, Ethiopia's deputy prime minister, said on Tuesday that diverting the flow at the site of the Great Ethiopian Renaissance Dam would provide hydroelectricity not only for Ethiopia but also for neighbouring countries, reported the state-owned Ethiopian Radio and Television Agency.

Egypt and Sudan have objected to the construction, saying it violates a colonial-era agreement which gives Egypt nearly 70 percent of Nile River waters.

Ethiopia, however, says the dam will not affect Egypt and that the 1959 agreement ignores the needs of five upriver countries.

"This project is said to cost between $5-6bn and is expected to produce 6000 megawatts to power not only Ethiopia but also export electric power to a selection of East African countries," said Al Jazeera's Azad Essa, reporting from Addis Ababa.

He added that the hydroelectric project, considered the biggest on the continent, is expected to be fully funded by the Ethiopian government and not foreign donors who refuse to enter into a dispute with Egypt.

No alternative sources

Egypt says its population of 90 million is among the largest in Africa and that unlike other Nile Basin countries, it does not have readily available alternative water sources.

Egypt's presidency said on Tuesday that it was awaiting a report by the Tripartite Nile Basin Committee, comprised of Egypt, Sudan and Ethiopia, to determine its next steps.

President Mohammed Morsi's spokesman said the move will not have a negative impact on the amount of Nile water reaching Egypt.

"The main issue and the essence of the matter is the impact of the dam itself and not of this step of diverting the course of water," Mohamed Edrees, the Egyptian ambassador to Ethiopia, told Al Jazeera.

He said that the diversion is a step in the construction of the dam, and will not affect either Egypt or Sudan in the amount of water because of an alternative by-pass route.

Some 84 percent of the water from the world's longest river originates in Ethiopia. The Blue Nile is one of two major tributaries of the river. The White Nile, flowing through Sudan, is the other.