FEARFUL of widespread revolt and strikes in Zimbabwe ahead of crucial elections it wants to be held this year, President Robert Mugabe's Zanu (PF) party has rejected austerity measures aimed at reining in the economy that has shown strong signs of stagnation.

The steps were proposed by Finance Minister Tendai Biti, a senior Movement for Democratic Change (MDC) member. He is expected to scale back growth targets of 9,4% for this year, to under 9%, and review the $4bn budget in a fiscal review, due next month.

Mr Mugabe last week surprised members of the unity government by convening an emergency cabinet meeting on economic performance.

Zanu (PF) political insiders say the 88-year-old leader convened the meeting under pressure from army generals, to deal with the unfolding economic crisis. It is understood that the army generals warned Mr Mugabe in the "strongest terms" of the threat of mutiny - as military personnel were disgruntled over food shortages at army barracks and low salaries. Defence Minister Emmerson Mnangagwa has threatened to send army generals to camp out at Mr Biti's offices until he releases more funding to his ministry.

Without the support of the military, the election campaign of its key backer, Zanu (PF) is weakened. The recruitment of 5000 new army personnel, who had stringent educational qualifications waived, is seen as early preparation by Zanu (PF) to arm its election machinery.

But Mr Biti has said there is "no choice" but to keep the new recruits and add them to the wage bill - which consumes 70% of government revenue monthly. Mr Biti's far-reaching austerity proposals include a salary freeze on public servants; cuts in the foreign travel bill which by last month had shot up to $46 m; disposal of parastatals; and control of the Marange diamonds handed to the treasury. Public servant unions have already warned Mr Biti not to be "careless" with the wage freeze.

Public servants earn $250 against a poverty datum line of $530. Prime Minister Morgan Tsvangirai seemed to back-pedal yesterday on the proposal from his MDC secretary-general and told parliament: "I do not know whether the government has adopted such a policy of wage freeze. There is no such policy. The government is committed to upgrade salaries of civil servants."

Prof Tony Hawkins, an economics professor at the University of Zimbabwe, said the MDC had found itself in a fix and had the difficult task of pulling the economy together, on the eve of canvassing for support in the next elections.

"Mr Tsvangirai doesn't want to appear to be backing a salary freeze ahead of elections. In effect, his concerns over the looming elections has made him and Mr Biti sing from different hymn sheets," he said.