LAHORE, Pakistan (CNN) -- Pakistani opposition leader Benazir Bhutto, freed from house arrest, has rejected President Gen. Pervez Musharraf's new interim government, deeming it "not acceptable."
Former chairman of the Senate Mohammad Mian Soomro was sworn in as prime minister.
Earlier Friday, Musharraf swore seven of his allies into a caretaker government on Friday, despite a pledge to include "people of a neutral band."
It will oversee the parliamentary process until national elections can be held no later than January 9.
"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.
But Bhutto, speaking shortly after being freed from house arrest in Lahore Friday, said, in an interview with SKY news, that Musharraf has shown he is an "obstacle to democracy."
In a press conference outside her home, Bhutto said that "the West's interests lie in a democratic Pakistan" and "in supporting the Pakistan's people."
"Please don't be deceived because I've seen the game played. PPP is the only national party with a popular base," Bhutto said, referring to her own Pakistan People's Party.
"If the people of Pakistan still want me to lead them, I will lead them. Do we want to deny this nation its true legitimate leadership and make way for extremist forces?"
The swearing-in ceremony, carried live on Pakistani state-run TV, showed the new members taking an oath to "bear true faith" to Pakistan, among other pledges.
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."
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.
Musharraf's term was set to end Thursday, but the military leader remained at the helm via extraordinary powers granted through an emergency declaration he issued November 3 that extends his presidential term.
The developments came as U.S. Deputy Secretary of State John Negroponte touched down in the Pakistani capital Friday for a scheduled meeting with Musharraf, the U.S. Embassy told CNN.
Negroponte is expected to meet Musharraf and other Pakistani officials over the weekend to convey how seriously the United States views his imposition of emergency rule and will suggest he rescind it, Senior State Department officials told CNN.
The Pentagon's press secretary, Geoff Morell, told reporters Thursday Musharraf needs to put Pakistan back on the path to democratic rule because "the more time President Musharraf spends trying to enforce the emergency rule, the more resources he devotes to that process, the less are available to go after terrorists in his midst and ours."
"So we are very much encouraging of him to get on with taking off his military uniform, holding free and fair elections, and getting back to law-based constitutional rule as quickly as possible."
Nearly all leaders of Pakistani opposition parties have been jailed or placed under house arrest, and charged under anti-terrorism measures. E-mail to a friend
CNN's Elise Labott and Mohsin Naqvi contributed to this report.
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