"Today the peace panel of our government and the MILF agreed on a mutual cessation of hostilities," Mrs. Arroyo said. "This (ceasefire) breakthrough is the result of the relentless back-channeling efforts undertaken by government representatives over several months in the Philippines and abroad."
Mrs. Arroyo said the government has reached a ceasefire deal with the MILF to lift the bounty reward on its leaders as well as military offensives against its fighters.
"I am directing the Armed Forces to downgrade our operational status from punitive operations to active defense. This is in line with the policy of calibrated reciprocity that will continue to guide our actions in the peace process," the President said.
Presidential Spokesman Ignacio Bunye said the warrants of arrest of MILF leaders who will serve as panelists in the negotiating table have also been suspended by the Davao City regional trial court.
Bunye said the rewards for the capture of the rebel leaders will be dropped and they will be given 90-day safe-conduct passes to attend the talks in Kuala Lumpur.
Foreign Affairs Secretary Blas Ople had said Thursday that negotiations with the MILF could reopen in Malaysia as early as next week.
Mrs. Arroyo said Malaysia is expected to deploy ceasefire observers to Mindanao shortly as she thanked Prime Minister Mahathir Mohamad "for his sincere and abiding support" to the peace process.
Mrs. Arroyo said she expects a Malaysian-led ceasefire observer team to arrive soon and would also seek help from members of the Organization of Islamic Conference (OIC).
"I call on the panels to immediately enter in formal talks towards a final peace agreement," Mrs. Arroyo said.
The government had talked about abandoning talks with the MILF after the bombing of a public market in Koronadal, South Cotabato that killed three and wounded 31 others earlier this month. But Mrs. Arroyo said the bombing would not deter the government from preparing for negotiations with the MILF unless the separatist rebel group is proven to be involved.
The ceasefire agreement was signed between chief government negotiator and presidential adviser on the peace process Eduardo Ermita and MILF vice chairman for military affairs Al Haj Ibrahim Murad.
"Effective July 19, 2003, the peace panels of the Government of the Republic of the Philippines (GRP) and the Moro Islamic Liberation Front (MILF) agree to a mutual Cessation of Hostilities leading to the holding of formal talks towards a Final Peace Agreement," the ceasefire pact stated.
Aware that past talks have failed, Mrs. Arroyo sounded optimistic that the decades-old separatist rebellion will end and that terror acts that have accompanied it will also cease.
"I ask our people to give peace a chance, even as we secure our absolute sovereignty and the enforcement of the law over all areas and at all times," she said. "As we address the roots of rebellion and secession, I am confident that we shall also effectively isolate and marginalize the dwindling terrorist cells in Mindanao and across our seas in the region.
"Peace is at hand. We shall forge the political will to preserve it for all generations of Filipinos," the President added.
The government gave in to a key rebel demand that arrest warrants be dropped against MILF leaders for alleged involvement in a recent series of deadly bombings rocking Mindanao.
The government wanted the MILF to petition the court for the suspensions, but the rebels claimed such move would be a virtual admission recognizing the Philippine Constitution or justice system.
"The warrants of arrest against the members and staff of the MILF panel have been suspended by the court," Mrs. Arroyo said. — With Lino de la Cruz