The festival, organised by the Apprentice Boys of Derry, had become a staple of the summer events calendar until 2006 when it was cancelled due to funding problems.

But it emerged last night that the Department of Foreign Affairs in Dublin has donated £27,000 towards staging the event, scheduled to take place from August 2 to August 9.

Apprentice Boys general secretary Billy Moore said that if it wasn't for this support, there would be no festival this year.

Welcoming the news he said: "We have a number of branch clubs in the south and obviously they are paying taxes, so they are happy and delighted to see this money coming from the Dublin government to promote our culture and traditions and heritage.

"We hope to encourage clubs in the Republic to come to events at our memorial hall where they will get free entry."

Mr Moore also said that he hoped that the Apprentice Boys would be able to meet with the Minister of Arts and Culture later this year and "chart a way forward so our festival can be one of lots in Northern Ireland celebrating diversity".

The Maiden City Festival takes place next month and marks the 319th anniversary of the ending of the 1688 to 1689 siege of the walled ramparts on the banks of the River Foyle, which was the longest siege in British military history.

The event describes itself as a "showcase for Protestant culture of tolerance and openness, and for the heritage that is entrusted to the Apprentice Boys of Derry".

This year's festival will take place at the beginning of August, culminating with the annual Relief of Derry celebrations on Saturday, August 9.

As well as the annual parade, the day will include events such as the traditional Walking of the Walls, Remembrance at the Cenotaph and the Service of Thanksgiving.

Speaking earlier this year, Mr Moore had said that the organisation had been working with the Ulster-Scots Agency in a bid to "deliver something special for the people of the city".

He added: "Between the two of us, we have been able to get funding from the Department of Foreign Affairs in Dublin and, of course, Derry City Council and that has enabled us to organise the festival for this year."