Southern Sudan is suspending talks and diplomatic contact with northern Sudan over claims that the northern government is funding militias in the south, a top Southern Sudanese official said Sunday.

The announcement, which follows clashes that have killed hundreds of people in recent months, could further destabilise what will become the world's newest country in July.

Pagan Amum, the secretary-general of the Sudanese People's Liberation Movement, on Sunday repeated allegations that the northern government is arming local tribes to use as proxy forces, a tactic it has repeatedly used in both Southern Sudan and the western region of Darfur.

"The country is in a crisis because the (northern ruling party) has been planning and working to destabilise Southern Sudan," he told reporters in the southern capital of Juba. He offered to provide documentary evidence on Monday.

The oil-rich south voted in January to secede from the north, but there are many issues that remain unaddressed, including the sharing of oil revenues, the status of southerners or northerners living across the border, and who controls the disputed border region of Abyei, a fertile area near large oil fields.

Many southerners fear the north does not want to lose southern oil revenues and the two regions may resume their decades-long civil war.

Amum said that the northern government wanted "to overthrow the government of Southern Sudan before July and to install a puppet government" in order to "deny the independence of Southern Sudan.”

"They have stepped up their destabilisation of Southern Sudan by creating, training, arming and financing various militia groups in Southern Sudan," he said.

Negotiations over the future of the volatile and contested north-south borderland of Abyei were set to resume Monday in Khartoum between Sudanese President Omar al-Bashir and southern leader Salva Kiir, with former South African president, Thabo Mbeki mediating the talks, but Amum said Sunday that these negotiations would not go ahead as planned.

"We have nobody to talk to [in the north]," said Amum.

The northern government has "been arming Arab tribes ... so that they carry out genocide and destroy Southern Sudan ... like what they have done in Darfur." Amum called on the United Nations Security Council to investigate the allegations.

The suspension of talks follows a raid by rebel forces opposed to the southern government early Saturday. The rebels attacked southern army forces in the strategic town of Malakal, capital of oil-rich Upper Nile state.

The rebel forces were repelled from the town by the army, but fighting continued sporadically throughout the day and into the evening as the military attempted to flush out rebels hiding throughout the town.

A UN official said that rebel forces took 103 children hostage from an orphanage during the fighting in Malakal and used them briefly as human shields. He asked for anonymity because he was not authorised to speak to the press.

The southern army reported late Saturday that 30 rebels had been killed and four southern troops wounded, but spokesman Col. Philip Aguer told The Associated Press that death tolls for civilians were not yet available and that casualty figures were expected to rise. Aguer was not immediately available to give updated figures on Sunday.