The main issues before the Pakistan People's Party and the Pakistan Muslim League-N are the reinstatement of judges dismissed by Musharraf and providing indemnity to the outgoing president, Dawn reported.
PPP's Asif Zardari and former Prime Minister Nawaz Sharif, who leads the PML-N, have refused to budge on the judges' issue, the newspaper said.
The coalition also needs to agree on a candidate to succeed Musharraf.
The two party leaders have been bitter rivals in the past.
Dawn reported Asfandyar Wali Khan, leader of another party in the coalition, has offered to mediate when the leaders meet again Friday.
Shariff, who was ousted as prime minister by Musharraf in a 1999 military coup, opposes giving him indemnity or safe passage, the newspaper said.
The BBC reported it was unclear if Musharraf would be prosecuted as he no longer holds power, although Zardari's party has said the ex-president may have immunity.
Separately, Xinhua quoted a local Pakistani television channel that Musharraf has said he does not plan to leave Pakistan.