Taliban co-founder Mullah Baradar will lead a new Afghan government set to be announced shortly, sources in the Islamist group said on Friday, as its fighters battled forces loyal to the vanquished republic in the Panjshir Valley north of Kabul.

The new government's most immediate priority, however, should be to stave off the collapse of an economyinfo-icon grappling with drought and the ravages of a conflictinfo-icon that killed an estimated 240,000 Afghans.

Baradar, who heads the Taliban's political office, will be joined by Mullah Mohammad Yaqoob, the son of late Taliban co-founder Mullah Omar, and Sher Mohammad Abbas Stanekzai, in senior positions in the government, three sources said.

"All the top leaders have arrived in Kabul, where preparations are in final stages to announce the new government," one Taliban official told Reuters, on condition of anonymity.

Haibatullah Akhunzada, the Taliban's supreme religious leader, will focus on religious matters and governance within the framework of Islam, another Taliban source said.

The Taliban, which seized Kabul on Aug. 15 after sweeping across most of the country, have faced resistance in the Panjshir Valley, where there have been reports of heavy fighting and casualties.

Several thousand fighters of regional militias and remnants of the government's armed forces have massed in the rugged valley under the leadership of Ahmad Massoud, the son of former Mujahideen commander Ahmad Shah Massoud.

Efforts to negotiate a settlement appear to have broken down, with each side blaming the other for the failure.

While the Taliban have spoken of their desire to form a consensus government, a source close to the militant movement said the interim government now being formed would consist solely of Taliban members.

It would comprise 25 ministries, with a consultative council, or shura, of 12 Musliminfo-icon scholars, the source added.

Also being planned within six to eight months is a loya jirga, or grand assembly, bringing together elders and representatives across Afghan society to discuss a constitution and the structure of the future government, the source said.

All the sources expected the interim government's cabinet to be finalised soon but differed over exactly when, with some saying it would be settled later on Friday while others felt it would take until the middle of next week.