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The United States says the power-sharing deal in Zimbabwe will not work with Robert Mugabe as president.
The US would not reverse sanctions policy while Mr Mugabe remained in power as he had "lost touch with reality", said its top envoy to Africa.
As well as suffering economic collapse, Zimbabwe is suffering from a cholera epidemic charities say is critical.
Talks on a power-sharing deal with the opposition following disputed elections in March have been stalled.
Progress has also stalled over who should control key ministries.
The opposition Movement for Democratic Change (MDC) party accuses Mr Mugabe of breaking the deal to form a coalition government and of abducting its members.
The US had supported the deal that was signed in September and promised to lift sanctions if it was implemented.
But US Assistant Secretary of State for Foreign Affairs Jendayi Frazer said it could no longer fulfil either of those pledges, and that Mr Mugabe had "reneged on the principle of power sharing".
"We have lost confidence in the power-sharing deal being a success with Mugabe in power. He has lost touch with reality," she said during a visit to South Africa.
"We were prepared to use the American influence to negotiate with the World Bank and the International Monetary Fund to clear the $1.2bn Zimbabwe debt, but now we are no longer prepared to do that."
Ms Frazer also called on African leaders to unite against Mr Mugabe, saying that if they were to "go to Mugabe and tell him to go, I do think he would go".
But neighbouring South Africa has again insisted that a power-sharing deal is the only option for Zimbabwe.
"We believe in that agreement as the way for Zimbabwe to deal with its problems," said Thabo Masebe, a spokesman for South African President Kgalema Motlanthe.
Cholera fears
Mr Mugabe has said he is not to blame for Zimbabwe's situation and has rejected calls from African and Western leaders to stand down.
On Friday, he told delegates of his ruling Zanu-PF at their annual conference that he would "never, never, never surrender".
"Zimbabwe is mine, I am a Zimbabwean. Zimbabwe for Zimbabweans," he said.
Mr Mugabe has said that the cholera crisis is over and was being used by the West as an excuse to invade Zimbabwe.
However, aid agencies have warned that the disease, which has already claimed 1,123 lives, could infect more than 60,000 unless its spread is halted.
Manuel Lopez, head of Medecins Sans Frontieres (MSF), said the epidemic remained at a critical level and would not subside until the rains end in March next year.
Opposition threat
Mr Mugabe signed a power-sharing deal with his rival, Morgan Tsvangirai, in September, under which Mr Tsvangirai would have become prime minister and headed a new council of ministers.
But the two leaders have been unable to agree on the distribution of key ministries.
Mr Tsvangirai has said that more than 40 members of his MDC party have since gone missing, presumed abducted.
He has threatened to suspend all contact with Zanu-PF unless there is an end to the abductions, saying there can be no meaningful talks while a campaign of terror is being waged.
Source:BBC
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