Al Jazeera's Kamal Hyder reported that the Taliban could be seen in the main city  still carrying their weapons, jeopardising the government deal.

Muslim Khan, a Taliban spokesman, speaking from Swat denied that the government was being challenged in Buner saying that the Taliban was not creating "any hurdle in the administration's work".

A Taliban commander said they would set up Sharia courts in Buner as they have done in Swat to end a "sense of deprivation", but would not interfere with police work.

Residents 'scared'

But several residents said they felt "scared" and planned to leave the Buner area, fearing similar violence to that in Swat.  

The development is likely to trigger further criticism of the accord agreed by Asif Ali Zardari, the Pakistani president, earlier this month for Swat, which the US says amounts to giving in to Taliban demands.

The Taliban is seeking to uphold Islamic law in the Swat valley and Buner [EPA]
In an interview published on Wednesday in the US newspaper USA Today, Nawaz Sharif, a former Pakistani prime minister, said: "They are now threatening to get out of Swat and take other areas into their custody. So we've got to avoid that situation."

The Pakistani authorities lost control in Swat, a former ski resort and a major tourist attraction, after a two-year campaign by fighters to enforce a Taliban interpretation of Islamic law.

The government allowed Islamic law courts in Malakand, a district of about three million people in North West Frontier Province that includes the Swat valley, in order to halt the unrest.

But the Taliban has yet to disarm and appears to be trying to exert and expand its control.
  
"We will soon establish our radio station. Our Qazis [Islamic judges] will also start holding courts in Buner soon," Mohammad  Khalil, a Taliban commander, told the AFP news agency.
  
Meanwhile, in neighbouring Dir district, a senior administration official was kidnapped by "unknown" people, according to another official.