Zimbabwe's President Robert Mugabe yesterday told his Mozambican counterpart Joachim Chissano, the head of the African Union that moves towards solving the country's political crisis were now in motion, Chissano said.

"I am under the impression now after talking to President Mugabe, that there are certain movements towards improvement of the political situation in the country," Chissano told state television after one-on-one talks with Mugabe.

But Chissano, who arrived in Harare Tuesday afternoon, said Mugabe admitted that Zimbabwe's economy was still suffering badly.

"On the economic side I am under the impression that there are still some serious problems," Chissano said.

Chissano, who is on his way to Swaziland to attend a global talkshop on sustainable development, said earlier he was passing through Harare to check on the progress made so far on "regional efforts aimed at resolving the political situation in Zimbabwe".

Zimbabwean church leaders are trying to bring the governing Zanu-PF party and the opposition Movement for Democratic Change (MDC) back to the negotiating table to break an impasse between the two sides who met briefly last year but broke off talks after putting together just a draft agenda.

The talks had been brokered by presidents Thabo Mbeki of South Africa and Olusegun Obasanjo of Nigeria who visited Harare shortly after last year's disputed presidential elections won by Mugabe.

The MDC, which had refused to recognise Mugabe as the head of state, has meanwhile extended an olive branch by dropping the contentious issue of Mugabe's legitimacy from a draft agenda it is proposing resumed talks with the ruling party.

But Mugabe on Monday said he would not go into nation-building partnerships with "enemies of the people" who he said had to "repent" first to seek common ground with his government.

Chissano had earlier indicated in Mozambique that African organisations had the capability to help resolve conflict on the continent, as shown by developments in Liberia where president Charles Taylor stepped down Monday.

"We will continue to work this way in other regions affected by conflict," he said.

While an admission was made of the dismal performance of the economy, Chissano said "on the agricultural side the perfomance is fairly good".

Zimbabwe is in the throes of an unprecedented economic crisis that has left inflation at more than 365% and more than 70% of the workforce unemployed.

Local currency is in short supply while an acute shortage of foreign exchange has seen the country running dry of petroleum-based fuels, with electricity supplies at best erratic.

More than half of the population will require food aid this year, according to international relief agencies.

Chissano and Mugabe are expected to travel to Mbabane, Swaziland Wednesday for the Global 2003 Smart Partnership International Dialogue, jointly convened by Swaziland and the Commonwealth Partnership for Technology Management. – Sapa-AFP.