Taliban co-founder Mullah Baradar will lead a new Afghan government that could be announced on Friday afternoon, sources in the Islamist group said, as it battled rebel fighters while striving to ward off economic collapse.

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

"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.

The Taliban, which seized Kabul on August 15 after sweeping across most of the country, have faced resistance in the Panjshir Valley, north of the capital, with 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.

ALSO READ: Assam Govt's Move to Rename Rajiv Gandhi National Park a 'Political Vendetta': Ripun Bora