A huge newly-built Ethiopian dam is cutting off the supply of water to Lake Turkana in northern Kenya, rights group Human Rights Watch said on Tuesday.

The Gibe III dam, along with a network of sugar plantations, has caused the depth of Lake Turkana to drop by 1.5 meters from its previous levels since the dam's reservoir began filling in 2015, according to a HRW report.

In one part of Turkana, the world's largest desert lake, the shore has receded by nearly two kilometres, threatening the livelihoods of fishing communities.

"Ethiopia is in such a rush to develop its resources that these downstream individuals, who are completely marginalised, just aren't part of the equation," said Felix Horne, a HRW researcher.

Built at a cost of 1.5 billion euros ($1.6 billion), Gibe III is the third-most powerful dam in Africa and the highest, at 243 meters (800 feet) in height.

The dam, which has already caused some controversy, is expected to double the electricity output of Ethiopia.

The country was the continent's fastest-growing economy in 2015, but GDP is expected to take a hit due to a series of anti-government protests that targeted foreign businesses, and to an ongoing drought.

Environmentalists and the UN cultural body UNESCO have condemned Gibe III, saying they fear the dam will staunch the Omo River, which provides 80 percent of the water flow into Lake Turkana.

HRW has also criticised Ethiopia's government for uprooting people along the river to make way for sugar plantations.

Ethiopia's Prime Minister Hailemariam Desalegn dismissed criticism of the dam in a speech inaugurating the project, saying Gibe III satisfied Ethiopia's power demands and allowed it to export electricity.

Ethiopia also plans 100,000 hectares (250,000 acres) of sugar plantation in the Omo River valley, along with factories to process the cane.

Tens of thousands of hectares have already been cleared, but Horne says the development should be reduced to preserve Lake Turkana's water level.

"I think the most important thing by far is that the sugar plantations, which are very water-intensive, that those be cut back," Horne said.

At Turkana, communal clashes have broken out over access to scarce water supplies.

Should the lake drop further, Horne worries conflict will intensify.