Environmentalists in Armenia warned on Thursday that the country's largest lake was in peril despite government efforts to save the Caucasus republic's most important water source.

An alliance of around 50 environmental groups issued a statement raising concern over the ailing situation at Lake Sevan, which is important to landlocked Armenia as a source of water for hydro-electric power.

"The fake activities of official agencies and the improper spending of budgetary funds, loans and grants are threatening the existence of Lake Sevan," the statement said.

The lake is also used for irrigation and fishing, but its level fell drastically by more than 20 metres (65 feet) from the Soviet era to the 1990s due to over-exploitation.

Water volume fell by 44 percent and the problem was compounded by pollution from sewage and industrial waste, turning some parts of the lake into swamp and causing species of fish and birds to disappear.

The authorities began a programme to restore water levels 10 years ago and in 2008 imposed limits on irrigation usage and banned the use of the lake's water for hydropower production.

"Thanks to these provisions the lake's water level began to heighten by 25 to 35 centimetres per year and rose by three metres over the past 10 years," Armenian environment protection ministry official Ashot Avalian told AFP.

But environmentalists warned that serious ecological problems remained and that water quality was still being affected.

"The water of Lake Sevan is more important than any oil or gas. People can live without those resources, but not without water," the head of Armenia's Union of Greens Hakob Sanasarian told AFP.