Zimbabwe's president has reached a deal with a breakaway faction of the Movement for Democratic Change (MDC) in power-sharing talks that could lead to the formation of a government, according to a ruling party official.

Arthur Mutambara, who heads a splinter group of the opposition MDC, signed up to a power-sharing accord late on Tuesday, a Zanu-PF official said.

"A deal has been reached between President [Robert] Mugabe and MDC-Mutambara faction which has been signed in the presence of President [Thabo] Mbeki [the South African president]," Reuters quoted the official as saying.

He added the deal would pave the way for a government.

Mutambara has refused to comment before Mbeki, who is mediating the talks, makes a statement.

But Welshman Ncube, a spokesman for the splinter group, denied reports of any deal with Mugabe, saying "it's a lie".

Morgan Tsvangirai, who leads the main faction of the MDC, earlier walked out of the power-sharing talks - in its third-day - without commenting to the media.

Tipping the balance

The main MDC faction has 99 seats in parliament, the Mutambara faction has 10 and Mugabe's Zanu-PF has 97.

If reports of a deal between Mugabe and Mutambara are true, Zanu-PF would gain an absolute majority in parliament.

This deal will not only exclude Tsvangirai from the power-sharing arrangement but may prompt protests from the West and some African governments for allowing Mugabe to cling on to power.

But it is still uncertain whether all the legislators in the Mutambara faction will follow him into the Zanu-PF fold.

So far the three Zimbabwean leaders have said little publicly about the talks, but pressure has been building for the political rivals to resolve the crisis, compounded after Mugabe's controversial presidential re-election in June.

Mugabe brushed off questions as he left the hotel in Harare on Tuesday, denying that talks had failed, saying: "Talks will never collapse as long as we have tongues."