LAHORE, Pakistan (CNN) -- Pakistan President Gen. Pervez Musharraf swore seven of his allies into a caretaker government on Friday.
Former chairman of the Senate Mohammad Mian Soomro was sworn in as prime minister.
"An old cabinet is gone and a new cabinet -- a caretaker government -- has been sworn in," Musharraf said to applause.
"Life continues, no body is permanent. One comes, one serves, tries one's best in the interest of the nation ... and then when they have to go, that is the way of nature. They have to leave, and this is what is democracy," he said.
The event, carried live on Pakistani state-run TV, showed the new members taking an oath to "bear true faith" to Pakistan, among other pledges.
The caretaker government will oversee the parliamentary process until national elections, which are to be held no later than January 9.
Leading the interim cabinet is newly installed Prime Minister Mohammad Mian Soomro, who previously served as chairman of the Senate, a key post because the Senate chairman is acting president when Musharraf is outside the country.
"We are are creating history because I think never has Pakistan seen such a smooth transition of government," Musharraf said after the official ceremony. "The ex-prime minister is sitting right in front of us. Never has such a smooth transition taken place before."
Musharraf had earlier pledged to include "people of a neutral band."
A close Musharraf associate, Pakistani Senator Nisar Memon, was sworn in as interim information minister, a post he previously held in Musharraf's government.
Abbas Sarfraz and Salman Shah -- both members of the ruling Pakistan Muslim League-Q party -- were appointed to the interim cabinet and previously served in Musharraf's cabinet.
Another member of the ruling party, Dilawar Abbas, was appointed to the interim petroleum minister post.
Other former cabinet members under Musharraf, Gen. Hamid Nawaz and Inam ul Haq, were appointed to the interim interior and foreign minister posts, respectively.
Asked Wednesday if Musharraf would include members of the opposition in the caretaker government, Musharraf was vague in an interview with The Associated Press but said "we are looking into names (from opposition parties)."
"We will make sure that the caretaker government contains people of stature, people of a neutral band, and those that can perform government functions well," he added.
Thursday marked the end of the term for Pakistan's parliament and provincial assemblies, which are scheduled to dissolve by November 20, according to Musharraf.
Elections are to be held 45 to 60 days from that date, and Musharraf has said he would like to see the vote take place before January 9.
The exact date will be set by Pakistan's Election Commission.
Earlier Friday, police in Lahore lifted the house arrest against opposition leader Benazir Bhutto, allowing the former prime minister to go free for the first time since Tuesday.
Bhutto has called on Musharraf to step down and said negotiations between her Pakistan People's Party (PPP) and him have hit a dead end.
Her remarks came Tuesday after Pakistani police surrounded the house where she is staying to prevent her from leading a Lahore-to-Islamabad march. Her supporters were also arrested.
Bhutto has entered into talks with her successor and rival, former Pakistani Prime Minister Nawaz Sharif, on forming an alliance against Musharraf. Sharif himself is exiled from Pakistan after Musharraf ousted him in a bloodless coup in 1999.
Meanwhile, U.S. Deputy Secretary of State John Negroponte was scheduled to arrive in Pakistan on Friday for weekend meetings with Musharraf and other Pakistani officials.
Negroponte will convey to Musharraf how seriously the United States views his imposition of emergency rule and will suggest he rescind it, senior U.S. State Department officials told CNN.
Pakistani police Thursday continued to enforce Musharraf's November 3 emergency order by cracking down on opposition rallies and rounding up hundreds of protesters in Karachi alone.
One rally there turned deadly Thursday when two youths were killed at a demonstration in support of Bhutto, police sources said.
The circumstances are unclear; Bhutto said she heard a report that police killed two of her "party people."
The deaths are the first to take place during rallies following the emergency order that suspended the country's constitution.
Nearly all leaders of Pakistani opposition parties have been jailed or placed under house arrest and charged under anti-terrorism measures.
Bhutto and other opposition leaders accuse Musharraf of imposing the emergency order so he could remain in power by avoiding an expected ruling from the previous Supreme Court that would have nullified his October election victory.
Musharraf has since sacked nearly all of the Supreme Court justices and replaced them with his allies.
He has said the emergency order was imposed to save Pakistan from governmental paralysis caused by the chief justice of the Supreme Court. He has said it improves stability and will foster peaceful parliamentary elections. E-mail to a friend
CNN's Mohsin Naqvi contributed to this report.
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