"The declaration of a six-month state of emergency is unlikely to improve dwindling investor confidence in Ethiopia", said Emma Gordon, a senior analyst with Verisk Maplecroft, a research firm.

There is "ample evidence" that Egypt provided training and financing to the Oromo Liberation Front, labeled a terrorist organization by Ethiopia, government spokesman Getachew Reda told journalists in the capital, Addis Ababa.

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He named Eritrea, which has a long-running border dispute with Ethiopia, and Egypt, embroiled in a row with Addis Ababa over sharing Nile waters, as sources of backing for "armed gangs", although he said it might not come from "state actors".

Rights groups say more than 500 people have been killed in protests in the Oromiya region since previous year, when anger over a development scheme for the capital turned into broader anti-government demonstrations over politics and human rights abuses.

Renewed protests erupted earlier this month when a religious festival taking place in Oromia's Bishoftu town turned into a violet anti-government protests, claiming the lives of 55 in a stampede that was triggered after police fired tear gas to disperse protesters.

The Ethiopian government has designated the OLF as a terrorist organisation, and accused it of fomenting the wave of anti-government protests by Oromo and Amhara ethnic groups which have spread across the country in recent weeks.

According to the report, the state of emergency was effective from October 8.

Western states, which are among the biggest donors to what is still a poor nation, want their companies to win deals in Ethiopia but have become increasingly concerned by the government's authoritarian approach to development.

This is the second statement released by Egypt's foreign ministry in less than 24 hours asserting that Egypt respects Ethiopian sovereignty, after Ethiopia released official statements accusing Egypt of supporting Oromo rebels.

Ethiopia's heavy-handed response to the protests has incited more protests.

Merkel's meeting with Prime Minister Hailemariam Desalegn focused on the country's newly declared state of emergency and other issues including migration. The US, the United Nations and rights groups including Amnesty International have criticised the government for violating constitutionally protected civil rights, such as criminalising legitimate dissent and jailing opponents.

During the 2016 Rio Olympic Games, Ethiopian marathon runner Feyisa Lilesa protested against what he said was unfair persecution of the Oromo people by the Ethiopian government.

Merkel will discuss the current political situation and "of course clearly address human rights", German government spokeswoman Ulrike Demmer said.

"The state of emergency will not breach basic human rights enshrined under the Ethiopian constitution and will not affect diplomatic rights listed under the Vienna Convention", said Desalegn.