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ISTANBUL (Reuters) - Turkey will press ahead with plans to dig a 45-km shipping canal running parallel to the Bosphorus, its environment minister said on Saturday, despite a government freeze on new investments as it reins in spending.

Work is due to start this year on Kanal Istanbul, a showcase construction project championed by President Tayyip Erdogan.

However the Turkish leader appeared to cast doubt on the $16 billion (£12.2 billion) scheme on Friday when he said his government would not consider new investments.

Environment and Urban Minister Murat Kurum said the ministry was moving ahead to acquire land along the canal route, and develop plans with contractors.

"Kanal Istanbul is the most important project in our ministry's 100-day action plan," he was quoted as saying by state-run Anadolu news agency.

The canal, which will link the Black Sea and the Sea of Marmara north and south of Istanbul, is aimed at easing traffic on the Bosphorus strait, a major global shipping lane.

It will also redraw the map of one of Europe's biggest cities, turning Istanbul's western side into an island.

Environmentalists have challenged the need for the waterway, saying its construction will destroy water basins which supply the city with freshwater and alter oxygen levels in the seas.

(Reporting by Irem Koca, Writing by Dominic Evans, Editing by Angus MacSwan)

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