The Egyptian ambassador to Portugal denounced President Anwar Sadat yesterday as a "dictator" and accused him of reducing the country's armed forces to importance.

Gen. Saad Shazly who was chief of staff in the 1973 war with Israel, described Sadat's peace initiative toward Israel as having made Jerusalem more "intransigent." He said Sadat has cut the capabilities of the armed forces by 60 percent of its pre-1973 standard.

[Egypt's official Middle East News Agency said Shazil has been suspended for "serious violations of the duties of his job" and ordered toCairo for trial]

In a handwritten, photostated letter distributed to the press, Shazly compared recent measures taken by his government against the rightist and leftist opposition to the draconian laws of Portugal's half-century-long dictatorship under Antonio Salazar.

"The new laws . . . are even more severe than all the antidemocratic laws which Salazar introduced in all his political life," he said. "Sadat is new driving all his political opponents to prison."

"Those who are criticizing his visit to Jerusalem are considered to be endangering national security and those who are criticizing his economic policy as non-socialist are considered to be endangering the social peace of country," Shazly said.

Shazly, 56, who has been in Portugal for nearly three years, said that he had not submitted his resignation as ambassador directly to the Egyptian government.

In later interview with the Portugese news agency ANOP, Shazly said,"I say what millions of Egyptians would like to say, but cannot . . . The wrong that Sadat had done to the past three or four years is irreparable."

Sadat won the landslide public approval in a national referendum last month for plans to crush domestic criticism from the right and the left, and followed up with a series of regulations to silence dissenters.

The embassador, who earlier was ambassador to Britain, said he was transferred to Lisbon in 1975 after an earlier disagreem ent with the Egyptian leader but would not accept another transfer.