By Lesley Wroughton

WASHINGTON, Nov 28 (Reuters) - The Central African Republic this week cleared its arrears to the World Bank, thanks to a loan by the French government and a grant by the World Bank, that will restore its ties with international donors, a senior bank official said on Tuesday.

The move comes as the former French colony tries to resurrect ties with the international community after years of political and economic instability that has seen foreign governments gradually withdraw aid and close embassies.

Ali Khadr, the bank's country director for the Central African Republic, said a World Bank grant of $82 million was approved on Tuesday. About $66 million will pay back a "bridge" loan financed by the French government and a further $12 million will cover future debt service payments.

"We expect there will be a similar resolution or some sort of agreement to clear arrears to other multilaterals," Khadr said in an interview.

"So it's a matter of getting a situation in place where multilateral donors restore normal financial relations with the CAR."

The Central African Republic's debt arrears to the World Bank and other institutions has accumulated since 2002 as political violence in the country escalated and economic management slipped.

Francois Bozize, who seized power in a 2003 coup e'tat, won presidential elections in 2005 but has battled rebels in the northeast of the country who oppose him.

Government troops, backed by French forces have launched an offensive against rebels who had captured several towns in the northern region.

Bozize and the government of Chad have both accused neighboring Sudan of backing raids across their frontiers by rebels from the violence-torn Sudanese region of Darfur.

Despite difficulties, the Bozize government had shown promising signs of restoring order to public finances and managing expenditures, Khadr said.

"Although the situation is very difficult, the reform agenda is formidable in terms of what they need to do to get things properly functioning again."

He said the government had also adopted measures to introduce more transparency in its mining and forestry sectors by disclosing information about contracts.

"So steps like that taken together give a reasonably solid track record that instills some confidence even though everybody knows the situation is extremely difficult," Khadr added.

Characterized by the development community as an "aid orphan" since donors withdrew assistance to the government, the Central African Republic is one of the world's poorest countries despite its diamond wealth. About 72 percent of its population lives below the poverty line.

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