Malta's Prime Minister Joseph Muscat Photo: IC

Malta's Prime Minister Joseph Muscat will step down on January 18, party sources told AFP on Saturday, following mounting criticism of his response to the murder of journalist Daphne Caruana Galizia.

The announcement came as the main suspect in the 2017 car bomb killing, tycoon Yorgen Fenech, 38, was charged with complicity in the murder. 

The court also ordered Fenech's assets to be frozen and he was returned to custody.

Party insiders said Muscat would step down once those behind the killing had been charged and his Labour Party had chosen a new leader.

"He always said that he will be leaving soon and he feels that now is the time to go," said one party source.

First, however, he wanted to see that the Daphne Caruana Galizia murder was solved ­under his watch, as he had promised, sources added.

"After the mastermind or masterminds are arraigned in court, he plans to announce that he will be stepping down and that there will be a leadership election on January 18," a party source told AFP.

The sources did not say when 45-year-old Muscat would announce his decision - or whether it would be via a televised announcement - but they stressed that he would not stay beyond January 18.

The news came amid mounting pressure from Caruana Galizia's family and protesters on the streets, who have cried foul over his handling of the affair.

The escalating murder investigation has rocked the tiny Mediterranean island and reached the highest rungs of politics, with two ministers and Muscat's chief of staff Keith Schembri stepping down from their posts this week.

Fenech has identified Schembri as the mastermind behind Caruana Galizia's killing, according to sources.

Schembri was arrested on Tuesday, but his release on Thursday sparked accusations of a coverup.

Muscat, who has vowed to resign if links were found between himself and the murder, said Friday he would remain in power, telling reporters he wanted "this case to be closed under my watch."

Caruana Galizia, a popular journalist and blogger described as a "one-woman WikiLeaks," exposed cronyism and sleaze within the country's political and business elite.