(Adds opposition politicians' quotes, background)

By Zeeshan Haider

ISLAMABAD, Sept 20 (Reuters) - Pakistani President Pervez Musharraf will seek re-election on Oct 6., despite legal challenges in the Supreme Court and slumping popularity, officials announced on Thursday.

U.S. ally General Musharraf has said he will retire from the army if elected, but opposition parties are trying to block his plan, and there is growing speculation that he is finally losing his grip on power after taking control in a coup eight years ago.

"The vote for the presidential election will be held on Oct. 6," Kanwar Muhammad Dilshad, spokesman for the Election Commission told Reuters.

The Supreme Court is hearing a set of petitions challenging Musharraf's right to retain his dual role, the legality of being elected while in uniform, and whether he should be allowed to get a mandate from the sitting assemblies before they are dissolved for a general election due by mid-January.

The outcome of the mounting political and constitutional crisis is of keen interest to the United States, which has counted on Musharraf's support to guarantee the success of Western intervention in Afghanistan and the war against al Qaeda.

Musharraf's foes immediately accused the president of trying to illegally bulldoze through his re-election.

"Pervez Musharraf has once again tried to flout the constitution through the Election Commission," Siddiqul Farooq, a spokesman for the party led by Nawaz Sharif, the prime minister Musharraf ousted.

The announcement had little impact on the Karachi stock market -- the index was 0.7 percent down at 13036.69 at 0800 GMT -- but investors were nervous about the political uncertainty, analysts said.

Musharraf's current tenure is due to expire on Nov. 15, and his top legal aide has told the court that he will be sworn in as a civilian leader if he is given a fresh five-year mandate.

The decision of the court is crucial for Musharraf's political future as analysts say he might impose emergency rule if the court blocks his re-election.

Musharraf derives most of his support from the army, while a loose collection of politicians brought under his banner after the 1999 coup has shown signs of disunity.

In Pakistan, members of the parliament -- National Assembly and Senate -- as well as those from the four provincial assemblies elect the president.

Musharraf's allies enjoy simple majority needed to elect the president, but they are expected to be in minority after the general election, unless new friends are found.

However, Musharraf, who has seen his popularity eroded since he tried to sack the Supreme Court chief justice last March, is trying to shore up his position by forging a power-sharing pact with former prime minister Benazir Bhutto, head of largest political party.

"There is no question of voting for a uniformed president. We will not be voting for a president in uniform," Sherry Rehman, spokeswoman for Bhutto's Pakistan People's Party, said.

That left open the possibility that Bhutto, who plans her return from more than eight years of self-exile on Oct. 18, could order PPP lawmakers to abstain, but remain in the assemblies to lend Musharraf's re-election more credibility.

Other opposition groups have threatened to quit parliament if his nomination is accepted.

Nomination papers for the presidential election will be filed on Sept. 27 while candidates will be finalised on Oct. 1.

"The honourable and the right thing to do would be for the president to leave the post of army chief first and contest the election as a civilian," The News, Pakistan's biggest selling English-language daily, said in an editorial.

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