Initial talks were suspended over a debt Zambia owes an oil firm.

"The position on Absa has changed for the better... I have authorised the minister of justice to restart negotiations after Absa indicated they wanted to reopen the talks," Mwanawasa told journalists.

The privatisation of Zanaco is a condition set by donors for Zambia to have US$3,8 billion (N$24,7 billion) written off its estimated US$6,8 billion in foreign debt.

A spokesman for Absa said that while high-level talks had been suspended, negotiations had been continuing among technical committees from the two sides.

"We are still taking to Zambia, and we will be looking at opportunities within the Zambian environment... Absa is keeping its options open," Absa spokesman Errol Smith said in Johannesburg.

Mwanawasa said he had told Absa that negotiations for a stake in Zanaco would not include the US$80 million Zambia owed Trans-Sahara Trading (TST), a unit of Canada's DiamondWorks.

TST borrowed funds from Absa to purchase crude oil for the southern African country in 2003.

Zambian officials cancelled the TST contract, and the country has yet to pay TST.

The TST debt was a sticking point in the initial talks, with Absa demanding that Zambia repay the money.

Zanaco has book assets of US$161,4 million, deposits of US144,1 million and 52 branches and agencies, according to data from the Zambia Privatisation Agency.

It is the largest retail bank with a 25 per cent market share.

-Nampa-Reuters

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