By Elias Biryabarema

KAMPALA, March 3 (Reuters) - Ugandan troops based in South Sudan are not massing along the Sudan border, Ugandan military officials said on Tuesday, after Sudan's state news agency reported 16,000 Ugandan soldiers were due to arrive near the frontier.

Sudan's Suna news agency on Monday said Ugandan soldiers were massing near the border to fight rebels opposed to President Salva Kiir's government, a move that Sudan finds "unacceptable and presenting a danger to Sudan's stability".

Uganda, however, denied the allegations.

"That is a bad lie. Ignore it," Uganda's military spokesman, Paddy Ankunda, told Reuters in a text message.

Senior Sudanese government officials said Suna's report was representative of Khartoum's concerns. "The second issue is Uganda's hosting of Sudanese rebels so this is a very serious step for us," a senior Sudanese official told Reuters.

Uganda's President Yoweri Museveni and Sudanese leader Omar Hassan al-Bashir, two strongmen who came to power in late 1980s, have had a historically fraught relationship.

Uganda sent troops to South Sudan soon after clashes broke out in Juba, the capital, and spread to major oil producing regions in December 2013. Uganda has been credited with giving South Sudan's military an edge over rebels loyal to Kiir's former deputy Riek Machar.

A representative of those rebels, Goi Yol, at peace talks in Addis Ababa agreed with the Suna report and warned the troop movement could "escalate the war" at a time when the two sides are within reach of a deal.

"It is mind-boggling that we are having more troops being added at this point," Yol said shortly before Kiir and Machar were due to meet for another round of negotiations.

Analysts and Western diplomats have voiced concerns that the South Sudan conflict could destabilise east Africa and suck other countries into a regional war, as happened when Congo was engulfed in chaos and violence between 1998 and 2003. (Additional reporting by Aaron Maasho in Addis Ababa and Khalid Abdelaziz in Khartoum; Writing by Drazen Jorgic; Editing by George Obulutsa and Louise Ireland)