By MacDonald Dzirutwe

HARARE (Reuters) - Uncertainty over the date of elections in Zimbabwe is pushing the fragile economy closer to recession just as it was pulling out of a decade of decline, the finance minister said on Tuesday.

Presidential and parliamentary elections should be held this year but political reforms and problems finding the money to pay for the vote in the impoverished country are holding things up and no date has been set.

Finance Minister Tendai Biti said the economy could have shrunk by up to 3 percent during the first quarter of this year due to election uncertainty as well as low farm output, declining tax revenues and export earnings.

"The elephant in the living room evidently is the election and the sooner there is clarity on the dates from the politicians the better for the economy," Biti told reporters.

Zimbabwe needs $132 million to fund the election but conditions attached to any foreign financing have divided the already fractious unity government, whose main players - President Robert Mugabe's ZANU-PF and Prime Minister Morgan Tsvangirai's MDC - will be rivals for power in the vote.

Any repeat of violence that accompanied the last vote in 2008 could end Zimbabwe's nascent economic recovery and unleash another refugee crisis similar to the one five years ago when hundreds of thousands fled to neighboring South Africa.

The state-owned Herald newspaper quoted Mugabe as saying regional leaders would hold a summit to discuss how to fund the election in which the president is seeking to extend his three-decade rule

Officials from the SADC regional bloc of 15 southern African states were not immediately available for comment.

ZANU-PF is pushing for funding with as few strings as possible. It withdrew a United Nations request to fund the poll accusing the U.N. of trying to interfere in domestic issues.

The MDC is keen to attach the money to the deployment of election observers. It fears ZANU-PF, whose members are under Western sanctions for suspected rigging of previous votes, will use the security forces to intimidate voters.

But SADC observers could be a compromise amenable to Mugabe, who regularly rails against the West for imposing sanctions he blames for ruining an economy that critics say was wrecked by his own policies.

ZANU-PF wants elections by June 29, when parliament will be dissolved, but the MDC says they should be delayed to allow for the opening of broadcast media - currently a state monopoly - to private players, registration of new voters and reform of the military to keep it out of politics.

Mugabe and Tsvangirai displayed rare unity this year in pushing through a new constitution at a referendum, a critical step for the election but which depleted state coffers for the next vote.

The new constitution clips the powers of the president and imposes a two-term limit. It does not apply retroactively so the 89-year-old Mugabe could, in theory, rule until he is 99.

(Editing by Jon Herskovitz and Robin Pomeroy)