South Africa's solid rand currency could help stabilise an economic crisis in Zimbabwe where inflation has rocketed to 4 500%, South Africa's Sunday Independent said.

It quoted unidentified sources as saying the Southern African Development Community (SADC) was working on a plan to extend the rand monetary union to Zimbabwe.

The monetary union, under which currencies are pegged to the rand, consists of South Africa, Namibia, Lesotho and Swaziland.

The plan would also involve the central banks in South Africa and Botswana injecting huge amounts of funds into their counterpart in Zimbabwe, the Sunday Independent said.

Mugabe's government this week sought to curb galloping inflation, the highest in the world, by ordering prices of basic goods slashed by half, but this sparked panic buying by shoppers who emptied shop shelves.

SECRET TALKS

To gain the rescue plan, Mugabe's ruling ZANU-PF party would have to agree to major political reforms in secret talks with the opposition due to start in Pretoria on Monday, the paper added.

No officials from the SADC or the South African Foreign Affairs Ministry were immediately available to comment.

SADC Executive Secretary Tonaz Salamao briefed leaders of the grouping about the rescue plan on the sidelines of last week's African Union summit and visited Zimbabwe on Thursday to float the plan with the government there, the paper said.

Southern African leaders at a summit in March asked South African President Thabo Mbeki to forge a deal between Zimbabwe's ruling party and the opposition Movement for Democratic Change.

That followed sharply rising tensions after opposition leader Morgan Tsvangirai and dozens of other MDC members suffered serious injuries after being arrested by police at an aborted prayer rally in Harare.

Mugabe, in power since independence from Britain in 1980, said on Saturday there was no need to create a new constitution, a key demand of the opposition ahead of elections next year.

Mugabe's government last month proposed new changes to allow joint presidential and parliamentary polls in 2008, in which Mugabe has said he will run.

The 83-year-old veteran ruler has accused firms of raising prices as part of plot to unseat him and says the economy has been sabotaged by Western foes, led by Britain.