The withdrawal of the African Party for the Independence of Guinea-Bissau and Cape Verde (PAIGC) from government marks the start of a fresh political crisis in the West African country that could endanger legislative elections due on November 16.

"PAIGC has decided to withdraw from the National Political Stability Pact and the Governmental Stability Accord," the party said in a statement.

Guinea-Bissau, sandwiched between Senegal and Guinea, has lurched from crisis to crisis since independence in 1974, suffering a series of coups and bloody uprisings.

The former Portuguese colony's jagged Atlantic coastline of islands, deltas and mangroves has become a major transit hub for Latin American drug gangs smuggling narcotics to Europe, a role which diplomats fear will intensify unless political stability can be established.

PAIGC's withdrawal from the political stability pact came after Prime Minister Martinho Ndafa Kabi dismissed four officials from high-ranking financial posts, without informing the party.

The sackings, announced on Friday, were the latest steps in a battle between PAIGC and the Social Renewal Party (PRS), one of two other signatories to the stability pact, for control of the country's public finances.

In February, PAIGC withdrew support for the prime minister, saying he had shown a lack of respect and signs of indiscipline in fulfilling his duties.

The political stability pact, signed last year between PAIGC, PRS and the United Social Democratic Party (PUSD), brought down the government of former prime minister Aristide Gomes.