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By Nelson Banya

HARARE, Jan 21 (Reuters) - Zimbabwean police have banned an opposition protest march planned for Wednesday, but the Movement for Democratic Change said it would press ahead with the demonstration against President Robert Mugabe's government.

The MDC, the country's main opposition party, said last week it would demonstrate against the crumbling economy and call for a new constitution which it said would guarantee that elections due in March would be free and fair.

"We are proceeding with the march ... we're marching because our people are suffering ... there's no water, no electricity. The government is totally bereft and bankrupt of any capacity to govern this country. This government has failed," Tendai Biti, secretary-general of the MDC faction that is led by Morgan Tsvangirai, told reporters on Monday.

The police, who had initially allowed the march, said in a letter that they had banned the protest because the MDC had broken an agreement reached at a meeting last week.

Zimbabweans have tended to shy away from demonstrations, mainly from fear of a heavy-handed response by Mugabe's security forces.

Assistant Police Commissioner Wayne Bvudzijena told state television the march had been banned over fears it would degenerate into violence and looting, and warned the MDC against any acts of defiance.

"We are not going to allow this march and we are going to use all the powers entrusted in the police to stop it," he said.

Tsvangirai, who was arrested and beaten with dozens of opposition members while trying to hold an anti-government rally last year, said earlier this month the party might boycott the elections unless the government implemented the new constitution.

The MDC said it had called the march to test the commitment to political reforms of Mugabe's ruling ZANU-PF party. The MDC is in talks with ZANU-PF, mediated by South African President Thabo Mbeki, that are aimed at ending Zimbabwe's political crisis

Asked if the MDC would pull out of the talks over the police ban, Biti said: "We've got full confidence in President Mbeki. We will remain on the negotiating table."

Political analyst and Mugabe critic John Makumbe said the march ban was predictable.

"This is a government which fears street protests, and they have a record of never taking chances. With what is going on in Kenya, I did not expect they were going to allow that to go ahead even for good marks on their political record," he said. (Additional reporting by Cris Chinaka; Editing by Giles Elgood)

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