President Sharif Sheikh Ahmed announced the imminent reshuffle -- which comes without the current prime minister resigning or being sacked -- at a press conference in Mogadishu.
"I am going to name a new prime minister who will form a government which will help the country get out of difficult times," Sharif told reporters gathered at the presidential palace in the Somali capital.
"As you know, the country has been in political turmoil and we need to end that crisis," he said, without making any formal announcement sacking the current government, which only controls a small part of Mogadishu in the strife-torn country.
A bitter dispute within Somalia's fragile transitional federal institutions flared over the weekend when Parliament Speaker Sheikh Adan Mohamed Nur blamed Prime Minister Omar Abdirashid Sharmarke for the country's woes.
Parliamentarians, angered by the speaker's comments, passed a vote of no confidence against him and appointed a temporary replacement.
The parliament speaker then declared that Somalia was without a government before joining Sharif in Monday's press conference and offering his resignation.
"In order to avoid causing trouble for the country in these difficult times, I decided to compromise and leave my position as speaker," Nur said.
It was unclear whether Somalia's prime minister and parliament would accept the president's call for a new government.
According to Somalia's transitional charter, the sacking of a prime minister should be submitted to parliament.
Many observers said Sharif may ask Sharmarke to stay and form a new government.
Somalia's unwieldy parliament and government have long been plagued by rivalries but the current crisis was one of the most serious since Sharif was elected in January 2009.
Since taking the helm of the internationally-backed transitional institutions, Sharif, a moderate Islamist cleric, has failed to build a broad national consensus and assert his authority on the country.
Instead, some of his former allies launched a devastating insurgency against him in May 2009, boxing him and his government back into a tiny perimeter of the capital, under African Union protection.
Since the start of 2010, Sharif and his government have been promising a major military offensive by newly trained and equipped troops to quash the Islamist insurgency but no operation of note has been forthcoming.
The prospect of a major reshuffle of the country's political map following such an offensive has sparked much jostling within the fractious government and on its fringes.
Led by the Al Qaeda-inspired Shebab, insurgents have taken advantage of the government's weakness to launch fresh attacks.
On Sunday, Islamist rebels shelled the newly rebuilt parliament building in Mogadishu, sparking clashes with government forces and African Union forces that left 11 civilians dead, officials said.
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