In an address to diplomats and state officials, Mr Mugabe said the government would issue promissory notes to white farmers and pay them in the future if the money was found.

Robert Mugabe: Tough on reform

He was once more emphasising that land reform would go ahead despite reluctance on the part of the international community to fund it.

At a donor conference last September, where Zimbabwe wanted to raise $1bn for land reform, there was a marked reluctance on the part of most countries to contribute until they had seen a pilot project being implemented fairly and transparently.

Zimbabwe says Britain, as the former colonial power, should fund the scheme to correct the legacy of unbalanced land ownership where about 4,000 white farmers own a third of all farmland.

Money is needed not only for compensation but also to build infrastructures such as water supplies and schools.

However, Zimbabwe cannot afford the large-scale programme it needs. This year's budget only provides enough funds to acquire and re-settle a handful of farms.

More than 900 farms have been earmarked for re-distribution to black subsistence farmers to redress imbalances in land ownership following the colonial era.

Critics say this will ruin Zimbabwe's agriculture-based economy and claim that land taken in the past was given to senior politicians rather than poor blacks.

Speaking after the president's speech, the Foreign Minister Sam Mudenge assured diplomats and journalists that re-distribution would be carried out in terms of the law - meaning that full compensation must be paid to farmers.

However, Mr Mudenge pointed out that the ruling party, ZANU-PF, has a huge parliamentary majority and so could change the law or the constitution as it wished.

The ZANU-PF party dominates the political landscape with 147 out of 150 seats in parliament.