This photo shows Malaysia's Prime Minister Mahathir Mohamad during the 14th East Asia Summit in Bangkok on Nov 4, 2019, held on the sidelines of the 35th Association of Southeast Asian Nations (ASEAN) Summit. (MANAN VATSYAYANA / AFP)

KUALA LUMPUR - Malaysia’s king on Monday accepted Prime Minister Mahathir Mohamad’s resignation but asked him to stay on in the role until a new premier is appointed and a cabinet formed, the country’s chief secretary said.

“His Highness has given his assent to appoint Tun Dr Mahathir Mohamad as interim prime minister, while waiting for the appointment of the new prime minister,” Chief Secretary Mohd Zuki Ali said in a statement, using an honorific for Mahathir.

Earlier Monday, the Prime Minister's Office said in a brief statement that "Mahathir Mohamad had sent a letter of resignation as Prime Minister of Malaysia today."

Mahathir, 94, assumed office in May 2018 for his second stint as prime minister after the Pakatan Harapan, or the Alliance of Hope coalition, won the general election that month. He is also the chairman of Parti Pribumi Bersatu Malaysia (PPBM), one of the four component parties of the Pakatan Harapan coalition.

The president of Mahathir's party announced that the party has quit the Pakatan Harapan coalition

The development comes after Mahathir and his anointed successor Anwar Ibrahim met Monday, and a day after surprise weekend talks between Mahathir’s party and other groups on forming a new government that would exclude Anwar.

Just before the release of Mahathir's resignation statement, PPBM President Muhyiddin Yassin announced that the party has quit the Pakatan Harapan coalition, adding that the party's supreme council had made the decision after a meeting on Feb 23.

"All members of the House of Representatives of the party are also out of Pakatan Harapan. All of them have signed the oath to continue to support and trust Mahathir Mohamad as Prime Minister of Malaysia," Muhyiddin said.

"This decision is made taking into account the current and future political developments of the country," he said.

The tussle between old rivals Mahathir and Anwar, 72, has shaped Malaysian politics for decades and tension has persisted, despite their alliance to win 2018 elections based on a promise that Mahathir would one day cede power to Anwar.

I am satisfied with his (Mahathir's) position, that it is the principle that we need to uphold.

Anwar Ibrahim, Malaysian PM Mahathir's anointed succesor

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“I am impressed with his position...to not bow to groups that want to seize power without an agenda for change,” Anwar told reporters outside Mahathir’s residence after the two met, but without saying what they had agreed.

Anwar added, “I am satisfied with his position, that it is the principle that we need to uphold. The reform agenda must be continued.” He described the meeting as having been “very good”.

Anwar also said that Mahathir has no plans to join hands with anyone from the previous ruling coalition he defeated to try to form a new government.

“Those within my party and outside using his name,” Anwar replied when asked if Mahathir was responsible for the current political turmoil.

“And he reiterated what he had said to me earlier, he played no part in it. He made it very clear, that in no way would he work with those associated with the previous regime.”

Finance Minister Lim Guan Eng, who is also the secretary-general of the Democratic Action Party, said the party would stand by Mahathir, and that the 94-year-old had resigned due to his principles, refusing to work with the United Malays National Organisation (UMNO) or form a "back-door" government through undemocratic means.

The Democratic Action Party is part of the Pakatan Harapan coalition.

The turmoil, amid growing fears about a spreading virus, had spooked investors, driving Kuala Lumpur’s benchmark to a 10-year low, while the ringgit currency slid 0.7 percent to an almost six-month low, its sharpest drop in over three years.

The yield on 10-year Malaysia government bonds leapt six basis points, the steepest jump since last October.

Malaysia's Prime Minister Mahathir Mohamad (left), accompanied by his deputy Wan Azizah Wan Ismail (center) and politician Anwar Ibrahim, arrives for a press conference in Kuala Lumpur on June 1, 2018. (MOHD RASFAN / AFP)

On Sunday, Anwar accused Mahathir’s party and “traitors” in his own party of plotting to form a new government with UMNO, the former ruling party ousted in 2018 amid widespread corruption accusations.

Sources said Mahathir’s party and a faction within Anwar’s party met officials from UMNO and the Islamist party PAS in efforts to form a new coalition and possibly back Mahathir to serve out a full five-year term as prime minister.

READ MORE: Mahathir says may be prime minister for 1-2 years

A day before meeting Mahathir, Anwar accused Mahathir’s party and “traitors” in his own party of plotting to form a new government with UMNO that would exclude him

'More than enough'

One source said the new grouping had more than the 112 members needed for a parliamentary majority, should they stake a claim to form a government.

“In terms of numbers, the new coalition has more than enough,” the source added.

Holding fresh elections was an option, said two of the sources.

All the sources sought anonymity because they were not authorized to discuss private discussions with the media.

Mahathir’s party, the opposition UMNO, the Islamist PAS and Anwar’s party faction did not immediately respond to requests for comment.

Mahathir’s party, UMNO and PAS met with the king, media said, though it was not clear what they discussed, and whether the new proposed coalition would secure backing from the king, who plays a largely ceremonial role in Malaysia.

Sources said Mahathir’s party and a faction within Anwar’s party met officials from UMNO and the Islamist party PAS in efforts to form a new coalition and possibly back Mahathir to serve out a full five-year term as prime minister

The king can dissolve parliament on the advice of the prime minister and his assent is required for the appointment of a prime minister or senior officials.

But it is unclear what his role would be if the ruling coalition changed without a change in prime minister.

Anwar was also due to meet the king at 0630 GMT on Monday, his spokesman said, but gave no details of what he would seek.

READ MORE: M'sia's Anwar says he has aid to become PM, decries sex tape

Anwar and Mahathir united ahead of the 2018 election to drive out the UMNO-dominated Barisan Nasional coalition that had ruled the Southeast Asian country for six decades in a surprise victory.

Anwar was Mahathir’s deputy when the latter was prime minister during his first stint from 1981 to 2003. But Mahathir sacked him in 1998 after they disagreed over how to handle the financial crisis.

Soon after Anwar was jailed for sodomy, charges he says were trumped up. He spent close to 10 years in jail on two sentences for sodomy, which is illegal in Muslim-majority Malaysia.

The developments come as the economy grew at its slowest pace in a decade in the fourth quarter. On Thursday, the government was expected to announce a stimulus package to alleviate the impact of a virus outbreak.