HARARE (Reuters) - Zimbabwean President Robert Mugabe said on Saturday he was working to resolve a political dispute threatening his power-sharing government with rival Prime Minister Morgan Tsvangirai's MDC party.

Tsvangirai's Movement for Democratic Change (MDC) said a fortnight ago it was "disengaging" from cabinet until Mugabe agreed to fully implement the fragile coalition's power-sharing deal, including swearing in several MDC officials.

Speaking at the burial of a senior member of his ZANU-PF party on Saturday, Mugabe again condemned the MDC's partial boycott of the government as "baffling and illogical," but said the issue had to be addressed as a domestic issue.

"We are glad that we are talking about it. We are treating it as a domestic political problem, and our attitude is that ultimately it is up to us as Zimbabweans to sort out our problems," he said in a mixture of English and the local Shona language.

Mugabe gave no further details or made reference to the mediation efforts of the 15-nation Southern African Development Community which had a ministerial team in Harare on Friday.

NATIONAL SHRINE

Tsvangirai and his officials did not attend the funeral at Harare Heroes' Acre, a national shrine where Mugabe's ZANU-PF movement has been burying mostly veterans of Zimbabwe's 1970s liberation war since it won power at independence in 1980.

Mugabe accused Western powers of "endlessly and shamelessly" interfering in Zimbabwe's domestic affairs and said the national economy had suffered under sanctions imposed in a drive to oust his party.

"They are trying to direct the way our politics should go. They are not ashamed. They want us to go down on our knees."

Mugabe -- who was speaking a day after regional officials announced that Southern African states would soon hold a summit on the Zimbabwe crisis -- said even in cases where Zimbabweans seek outside help, they have the ultimate responsibility to resolve domestic disputes.

The veteran 85-year-old president sounded slightly conciliatory to the MDC on Saturday, saying he only wonders about his rivals' political strategy of "one leg in and one leg out of the power-sharing government."

Besides refusing to swear in some of its members into government, the MDC accuses ZANU-PF -- which it calls an "arrogant and unreliable partner" of persecuting its officials and delaying media and constitutional reforms that will be key to holding free and fair elections in about two years.

Mugabe says he has met obligations under the power-sharing deal and maintains the MDC needs to campaign for the lifting of Western sanctions against his ZANU-PF, including travel restrictions and a freeze on general financial aid to Zimbabwe.