Egypt denounced Ethiopia on Wednesday for moving forward with building and operating a hyropower dam on the Nile, which Cairo worries will threaten already scarce water supplies.

Ethiopia, the source of the Blue Nile which joins the White Nile in Khartoum and runs on to Egypt, says the dam will not disrupt the river's flow and hopes the project will transform it into a power hub for the electricity-hungry region.

A diplomatic standoff has heightened tension between the countries, which have held on-again-off-again talks over the Grand Ethiopian Renaissance Dam (GERD) for years.

They signed a "declaration of principles" with Sudan in 2015 as a basis for negotiations, but no breakthrough has been made since.

Egypt relies on the Nile for up to 90% of its fresh water, and fears the dam, which is being built in Ethiopia close to the border with Sudan, will restrict already scarce supplies.

"Ethiopia's moving forward with the operation and filling of the Renaissance Dam is unacceptable and a clear violation of the Declaration of Principles and will have negative consequences for stability in the region," Egyptian Foreign Minister Sameh Shoukry said in parliament on Wednesday.

"We call on the international community to shoulder its responsibility in finding a solution that satisfies all parties."

After talks stalled, Egypt submitted a proposal on August 1, including conditions over filling the reservoir.

Earlier this month, Ethiopia rejected that proposal, calling it "an effort to maintain a self-claimed colonial era-based water allocation and veto power on any project in the Nile system".

Last week, Egypt said the talks were deadlocked, accusing Ethiopia of "inflexibility" and calling for international mediation. Ethiopia rejected that call.

Egypt has sought assurances that the dam will not significantly cut the river's flow to its rapidly growing population.

Sudan also hopes to benefit from electricity produced by the GERD.