Algerian President, Liamine Zeroual, has entrusted presidential advisor and former ambassador, Ismail Hamdani, with forming the new government.

The main opposition to Algeria's government is Islamic fundamentalists

Mr Hamdani, 68, has a long experience of Algeria's internal policy-making and diplomacy.

He was an advisor to President Houari Boumedienne in the 1970s and became number two at the foreign ministry in the 1990s.

He was also ambassador to Paris, Madrid and Stockholm.

Mr Hamdani is expected to announce on Wednesday his cabinet, which is thought likely to retain most of the ministers who served under Ouyahia, except for the interior, communication and justice ministers.

Newspapers said Mr Hamdani's task will focus on steering violence-stricken Algeria into a presidential election planned for April to replace President Zeroual, who is cutting short his five-year mandate by 19 months.

"Although he has experience of politics, he has no partisan political links which was a great advantage in his being appointed prime minister," said the Algerian newspaper, Liberte.

Mr Hamdani succeeds Ahmed Ouyahia, who resigned on Monday after increasing criticism from opposition parties because of his austerity measures aimed at dealing with the country's serious political and economic problems.

Mr Ouyahia, who was in power for three years, also faced criticism for his failure to prevent the continuing civil conflict in Algeria, in which tens of thousands of people have died since the military cancelled elections in 1992.

Although Algeria's economy has progressed over the last four years, due to an International Monetary Fund loan, Mr Ouyahia 's efforts to keep inflation down and consolidate the government's budgetary position have come at a high cost.

Hundreds of companies have gone bankrupt and hundreds of thousands of people have lost their jobs.

There were several strikes this year among teachers, postal workers, the metal workers' industry and the aviation sector, protesting against the country's economic situation.

Sinking oil prices have sharply reduced the country's foreign currency earnings, 95% of which come from the sale of oil and gas.

Mr Ouyahia defended his policies by saying they would bring long-term benefit to Algeria and were necessary to make the transition from a state-run economy to a modern market economy.