DJIBOUTI (AP) _ Djibouti has restored full diplomatic relations with Egypt following a seven-year break over Egypt's peace treaty with Israel, the government announced Tuesday.

The East African nation's Foreign Minister, Moumin Bahdon Farah, said in a statement that the expected exchange of ambassadors ''will give new a impetus to the search for Arab unity.''

Despite the diplomatic boycott of Egypt voted by the Arab League in the wake of the 1979 Egyptian-Israeli peace treaty, most Arab countries maintained ''all kinds of relations with Egypt,'' the statement said.

By its position in the Middle East and the Arab world, Egypt is bound to play an indispensable role in the search for a solution to the Palestinian problem, the statement said.

Djibouti, wedged between Ethiopia and the Red Sea, receives extensive economic assistance from Egypt, including many Egyptian physicians and medical personnel who are stationed there permanently.