The Red Sea state has been Ethiopia's major outlet to the sea since Addis Ababa lost the ports of Assab and Massawa when Eritrea won independence in 1991.

Ethiopia gave Guelleh 7,000 hectares of land some 400 km (250 miles) south of Addis Ababa, where government officials say he will grow wheat.

"A team of experts has already started preliminary work to set up a modern and mechanized farm," said the officials, who spoke on the condition on anonymity.

Guelleh, who was in Ethiopia last week with his wife and a ministerial delegation, was also given 10,000 square metres of lakeside land some 45 km (30 miles) east of the capital on which to build a holiday home, the officials said.

Guelleh already owns a $5 million presidential residence in Ethiopia's eastern town of Dire Dawa, they said.

Djibouti's port earns about $300 million a year from handling some 4.6 million tonnes of Ethiopian goods, and recently said it would raise its tariffs on port services, prompting Ethiopia to send its trade minister to Djibouti.

Last month Djibouti accused Eritrea, which is also at loggerheads with Ethiopia, of starting clashes on their border in which 12 Djiboutian soldiers were killed and 55 wounded.