In a move seen as a challenge to the US-appointed Governing Council, a young Shiite cleric has announced that he is forming his own cabinet in Iraq.

Moqtada Sadr, whose militia patrols parts of a Baghdad slum, made this announcement in Kufa near the holy city of Najaf after the Friday prayers.

The cleric has called on his followers to stage "peaceful demonstrations that express your agreement", The Washington Post reported on Sunday.

Sadr has denounced the US occupation and the Governing Council.

"Although this might entail some danger to my person," Sadr said, "I have created some cabinet posts in our government. I want a state of freedom and democracy."

According to the paper, Sadr is the son of a highly respected Shiite cleric who was assassinated in Najaf in 1999.

However, the extent of his own following is not clear.

Unlike several more senior clerics, he favours establishing a theocracy similar to that in Iran.