Fredericton is planning to build a $2-million roundabout that is intended to ease traffic on two busy city streets and a provincial highway.

The city announced plans in its latest budget to build the largest roundabout in Fredericton, which will connect Smythe Street, Bishop Drive and Highway 8.

Darren Charters, a traffic engineer with the city, said connecting Smythe Street and Bishop Drive will ease traffic problems in other parts of the city.

"Regent [Street] and Prospect [Street], it will take thousands of vehicles away from that intersection, which has only gotten busier because of the Corbett Centre, Costco, etc. So that's a major benefit to it," he said.

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Darren Charters, a traffic engineer in Fredericton, said the new roundabout will ease traffic in a busy area. (CBC)

"A secondary benefit is, this really opens up development on the Bishop Drive area."

Since the plan involves a provincial highway, the city needs approval from the Department of Transportation.

Engineers will have to come up a plan to slow highway traffic and build a crosswalk on Highway 8.

As well, some intersections will need to be upgraded and widened before the roundabout can be constructed. That work is expected to start this year, but changes to Highway 8 will not start until 2014.

The roundabout was unveiled in a city budget earlier this week that was dealing with significant cuts from the provincial government.

Coun. Bruce Grandy said the plan to install a roundabout in the area is still cheaper than building an overpass.

"We've been lobbying the government for an overpass, and … with the financial situation, the government's in we know that's not going to happen for some time. So we have to do something," he said.

The city has set aside $500,000 to start the project this year.

Grandy said Fredericton is willing to pay the full cost of the project, but he is hoping the provincial government will come forward with some financial help.

Fredericton has already installed two roundabouts in other parts of the city.