By Cris Chinaka

HARARE (Reuters) - Zimbabwe's opposition and the ruling party of President Robert Mugabe will sign a deal on Monday laying down a framework for formal talks to end the country's deep crisis, both sides said.

An official of the opposition Movement for Democratic Change (MDC) said its leader, Morgan Tsvangirai, would sign the deal with Mugabe.

"I can confirm that the president (Tsvangirai) is going to sign that agreement in person," an MDC official told Reuters.

A Zimbabwe government official said the deal would be signed at a Harare hotel at 3 p.m. (2:00 p.m. British time). He did not say if Mugabe would sign for ZANU-PF.

South Africa said President Thabo Mbeki, the official regional mediator in Zimbabwe, would travel to Harare for the signing of a memorandum of understanding between Mugabe's ZANU-PF and two factions of the MDC.

Both sides have been under heavy world and African pressure to enter negotiations after Mugabe's re-election on June 27 in a widely condemned presidential poll boycotted by the opposition.

Analysts said the talks were only a first step in paving the way for formal negotiations that are expected to be extremely tough, with both Mugabe and Tsvangirai demanding to be recognised as Zimbabwe's rightful president.

Zimbabwe's economic collapse under Mugabe's rule has flooded neighbouring countries with millions of refugees and saddled the once prosperous country with inflation of at least 2 million percent as well as crippling food and fuel shortages.

Tsvangirai, leader of the main opposition faction, has previously refused to sign even a framework deal unless government militias stopped violence he says has killed 120 of his supporters and Mugabe recognised his victory in the first round of the presidential poll on March 29.

He pulled out of the run-off because of the violence.

Mugabe blames the opposition for the bloodshed between the two rounds of the election.

MEDIATION BROADENED

The atmosphere changed late last week when Mbeki agreed to expand the mediation process to include the African Union, United Nations and other officials from the Southern African Development Community (SADC) as a "reference group."

Mbeki is expected to liaise with the group although it will not be directly involved in negotiations.

Expansion of the mediation beyond Mbeki has been a key demand of Tsvangirai, who has strongly criticised the South African president, accusing him of favouring Mugabe.

Western powers, who have unsuccessfully tried to push targeted sanctions against Mugabe's circle and an arms embargo through the United Nations, also called for expanded mediation.

Mbeki, who favours a softly softly approach to Mugabe, has failed to end the crisis as the single mediator since last year and has come under strong criticism both at home and abroad.

"The Memorandum represents a positive step forward in the ongoing dialogue among the parties as facilitated by President Mbeki acting on behalf of SADC," the South African statement said.

Mugabe, Zimbabwe's leader for 28 years, insists that the opposition accept that he is the duly elected president, despite Tsvangirai's demand that the first round result should stand.

"Tsvangirai has so far done well to press for and win a role for both the AU and the UN in the mediation process, but he has to remain alert all the way because he is dealing with a foxy man -- Mugabe," said Eldred Masunungure, a political science professor at the University of Zimbabwe.

"The actual negotiations are going to be a lot tougher and the MDC's aim of easing Mugabe out of power or sharing executive power (with ZANU-PF) in a transitional government ahead of another election is going to be more difficult to get," he said.

John Makumbe, a Mugabe critic and veteran political commentator, said while negotiations were important to end the deepening crisis, the MDC was in danger of "legitimising an illegitimate regime."

"Mugabe wants these negotiations to ease pressure on his regime, and they are going to wave these talks to tell the international community to get off their backs," he said.

"The MDC is only going to achieve its aims by playing a tough game against Mugabe...but there is also a danger that unless they tread carefully, Mugabe will outwit them and they could end up in disarray," he said.

(Additional reporting by Paul Simao and Marius Bosch in Johannesburg; Writing by Barry Moody; Editing by Matthew Tostevin)