"Deal is close, all to be concluded on Thursday" – Robert Mugabe

"We have made some progress, we will finish tomorrow," Mugabe told reporters after Wednesday’s session of negotiations, mediated by former South African President Thabo Mbeki, ended without an agreement.

Zimbabwe’s parties are close to a deal on forming a cabinet and "history is being made" in negotiations between President Robert Mugabe and rival Morgan Tsvangirai, the opposition MDC said on Wednesday.

Asked by reporters when talks aimed at rescuing a power-sharing deal would be sealed, MDC chief negotiator Tendai Biti said: "If you pray hard, tomorrow. History is being made and mountains are being moved."

Mugabe and Tsvangirai are holding talks in Harare mediated by former South African President Thabo Mbeki after the pact he brokered last month faltered over a dispute about cabinet posts.

Analysts say the deal is Zimbabwe’s best hope for halting an economic meltdown marked by the world’s highest inflation of 231 million percent and severe food, fuel and foreign currency shortages.

Arthur Mutambara, leader of a splinter MDC faction who is also taking part in the talks, said the parties were "very close" to an agreement.

"We’ve had a very long and productive day, we’ve made progress. We’re very close and our discussions will continue tomorrow," he said.

Almost eight hours of talks ended without a breakthrough on Wednesday, the second day of negotiations. But they will resume on Thursday at 0930 GMT, Tsvangirai said, adding: "there are some matters still outstanding."

Tsvangirai threatened to pull out of the agreement on Sunday after Mugabe allocated key ministries, including defence, home affairs — which oversees the police — and finance, to his ZANU-PF party.

The Herald newspaper, controlled by President Robert Mugabe’s administration, said earlier proposals would be tabled on leadership of the finance ministry, which is crucial to reviving Zimbabwe’s ruined economy and attracting foreign investment.

Citing sources, the Herald said one proposal was for a nominated finance minister to have two deputy ministers from Tsvangirai’s Movement for Democratic Change and a smaller breakaway faction of the party. Another option was to appoint a neutral person to the post.

Mugabe’s party was stripped of a majority for the first time since independence from Britain in 1980 after a March 29 election which the opposition says he rigged to retain power.

The rivals are under pressure to reach a settlement and international donors have pledged to pump in money if a democratic government is formed and economic reforms implemented.

Some analysts say Mbeki may have less leverage in Zimbabwe after being ousted as South African president by his own party last month. Reuters