The 84-year-old president's party and the opposition Movement for Democratic Change have been in deadlock over a power-sharing deal since September as the economic and humanitarian situation has deteriorated.
More than 1,000 people have died in a cholera epidemic exacerbated by a devastated health care system and poor sanitation.
Kgalema Motlanthe, South Africa's president, has said that he believed the proposed unity government was still the best way to resolve the situation and it should be formed quickly.
Al Jazeera's Haru Mutasa, reporting from Bindura where the Zanu-PF conference was being held, said "things are basically unbearable" for the majority of people in Zimbabwe.
If you don't have the US dollar you can't buy basic products in the supermarkets ... the Zimbabwe currency is pretty much worthless," she said.
Mutasa said that Mugabe remained defiant despite the widespread international criticism.
"He is blaming the United Kingdom, he is blaming the United States, he is blaming Western nations for Zimbabwe's problems," she said.
More than 20,000 suspected cases of cholera have been reported in the impoverished nation since the epidemic began in August, according to the UN Office for the Co-ordination of Humanitarian Affairs (OCHA) said.
More than 1,100 people have died across the country with Harare, the capital, hardest hit with 224 people killed by the disease and more than 9,000 believed to be suffering it.
Nine out of Zimbabwe's 10 provinces have reported cases of cholera and the World Health Organisation has said the total number of cases could reach 60,000 unless the epidemic is stopped.
The British charity Oxfam has asked international donors for $6m to fight the epidemic.
Oxfam said it was preparing to "substantially" scale-up its work in Zimbabwe, where it is providing food, water purification tables and soap to one million people.
"The rapid deterioration of the situation in Zimbabwe makes this an extremely grave humanitarian crisis which could deteriorate even further in 2009," Jane Cocking, Oxfam humanitarian director, said.
"While the international community battles for a political solution in the country, millions of Zimbabweans are going hungry."
Mugabe has blamed the West for the cholera outbreak accusing Britain and the US of using "biological weapons".
He has frequently attacked the West, including Britain, the former colonial ruler, accusing it of seeking to overthrow him and causing the the country's woes through sanctions.