ADDIS ABABA - Djibouti has dropped plans to raise port tariffs that would have cost land-locked Ethiopia an extra $22 million a year, the government in Addis Ababa said on Monday.

The Red Sea state has been Ethiopia's main gateway for imports and exports since it lost the ports of Assab and Masawa when Eritrea won its independence in 1991.

"The Ethiopian government has been notified that the proposed tariff raise has been waived indefinitely," Ethiopia's Ministry of Transport and Communication said in a statement, adding the tariff had been due to take effect on August 15.

"Had the tariff increment become effective, Ethiopia would have paid an additional $22 million on top of the $300 million it is paying a year to Djibouti port for handling 4.6 million tonnes of goods annually."

Ethiopian government sources said Djibouti's decision to scrap the plans followed a visit by Djiboutian President Omar Ismail Guelleh to Addis Ababa last month.

During that trip, Ethiopia gave Guelleh large tracts of land for wheat farming and a lakeside holiday home, officials said.

Djiboutian officials could not be reached for comment.

- Reuters