MANILA, Sept. 13 (Reuters) - The leader of the Philippines' largest Muslim separatist group said on Thursday he was open to holding negotiations during the Islamic holy month of Ramadan to re-start stalled peace talks.

Ebrahim "al Haj" Murad, leader of the Moro Islamic Liberation Front (MILF), said efforts to "regain our usurped freedom and immorally annexed homeland" could take place at any time.

"Be it known to everyone that the MILF leadership is ready to work for peace even during the fasting month of Ramadan," Murad said in a statement posted on the rebel Web site www.luwaran.com.

Muslims pray and fast from dawn to dusk for 30 days during the holy month of Ramadan, which started on Thursday.

Nearly 40 years of Muslim separatist conflict has killed more than 120,000 people and displaced 2 million in the south of the mainly Roman Catholic Philippines. Talks to end the rebellion have been stalled since September 2006.

The two sides have been unable to reach an agreement on the size and wealth of a proposed ancestral homeland for Muslims after signing deals to rebuild conflict areas and to cease hostilities during the period of negotiations.

The talks have been postponed four times this year due to congressional elections in May, the resignation of the government chief negotiator in June and fighting in July and August.

Last week, Manila's new chief negotiator asked for more time to finalise the government's position due to debate within the cabinet of President Gloria Macapagal Arroyo on how to proceed with the talks.

"We're still hoping to meet within this month," Rodolfo Garcia told Reuters early in September, adding he was aware of the MILF's position and readiness to hold talks during Ramadan.

Arroyo herself is optimistic the two sides are close to signing a deal although she has not mentioned any dates for the resumption of talks.

"We are close to a peace agreement with the MILF," Arroyo told a peace forum in Manila on Wednesday. "I remain optimistic we can overcome the final barriers on ancestral domain so that we can bring finality to the peace."

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