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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 economy grappling with drought and the ravages of a conflict 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.