Islamabad - A Pakistani newspaper said Thursday embattled President Pervez Musharraf has decided to resign and a formal announcement was expected soon.

The retired general, who took over in a bloodless coup in 1999, has been under immense pressure to leave the office since February 18 elections which saw his political allies defeated outright.

The president "has made up his mind to call it a day and he can make an announcement in this regard anytime," the English-language daily The News reported, quoting what it called highly placed sources.

On Wednesday, a presidential spokesman called the spreading rumors of a resignation "unsubstantiated."

"President Musharraf is not resigning," presidential spokesman Rashid Qureishi told private Dawn TV channel. "President Musharraf has been very supportive of the government."

The newspaper reported in Thursday edition that the president had finally lost hope of political survival and decided to opt for a retired life.

The report came five days after country's ruling coalition, led by slain former premier Benazir Bhutto's Pakistan People's Party (PPP), announced it was cutting Musharraf's powers through constitutional amendments, turning him from an all-powerful leader into a mere ceremonial president.

Bhutto's widower, Asif Ali Zardari who now leads the PPP, said Saturday he hoped that by stripping Musharraf of powers to dissolve the parliament and government, and appoint the commanders of the armed forces, the president could be forced to leave voluntarily.

"We intend him to walk away rather than impeach him away," he said.

Musharraf, a key US ally in the fight against Islamic extremists, began losing popularity in March 9, 2007, when he removed the independent-minded chief justice Iftikhar Chaudhry, who was restored five months later by a defiant judiciary.

But the president, who was then also still head of the army, repeated the measure under an emergency order on November 3 that also sacked 60 top judges together with Chaudhry, just as the Supreme Court was preparing to rule on his controversial re-election for the next presidential term.

Under immense international pressure Musharraf shed his uniform, lifted the emergency and held parliamentary elections - in which his ally Pakistan Muslim League-Quaid was thrashed by PPP and Pakistan Muslim League-Nawaz of former prime minister Nawaz Sharif.

Despite unpopularity, Musharraf remained in power mainly due to support from the military that is now thinning away.

Some media reports suggested recently that tensions have risen between him and the new army chief, Ashfaq Pervez Kayani, who has recently replaced president's loyal from the command of the elite 111 Brigade that was at the forefront in most of coups.

According to The News, Kayani had an "extremely important meeting" with Musharraf late Wednesday night that lasted for more than three and half hours.

The report, titled "General Kayani looks Musharraf in the eye," did not give further details about the meeting but linked it indirectly with the president's alleged decision to resign.

It also claimed that the president had been warned by "important officials" not to think about any extra-constitutional steps like dissolving the government for his survival.

"The drop scene of the drama that started on March 9 last year is bound to appear any time soon," claimed The News. (dpa)