Buoyed by renewed hopes of peace in Nepal, the country's political parties, citizens and business community on Thursday celebrated the ceasefire called by the government and the Communist Party of Nepal (Maoist).

The two sides declared a ceasefire on Wednesday after around eight years of fighting, which has claimed thousands of lives.

Minister of Physical Planning and Works Narayan Singh Pun, believed to be the one to have brought the Maoists to the negotiating table, said talks between the two sides had begun.

"We will make the necessary arrangements for holding a round-table conference [one of the key demands of the Maoists] some time this week," Pun said in Kathmandu.

The Maoists are also demanding the formation of an interim government, which will conduct elections for a constituent assembly.

"It looks like from now on peace will prevail...," Dinesh Shrestha, a taxi-driver in Kathmandu, said.

"If all the parties [the political parties, the government and the Maoists] can get their act together, and both sides maintain flexibility during talks, peace can prevail...," agreed Uddhav Sharma another resident of the national capital.

Several foreign nations issued statements welcoming the ceasefire.

"We hope the ceasefire will lead to a negotiated settlement and towards peace in Nepal," British Foreign Office Minister O'Brien said late on Thursday.

The United Kingdom, which leads the International Support Group, formed at an international meet in London last June, continues to coordinate international efforts to help resolve the conflict in Nepal.

"To achieve durable peace, security and stability in Nepal, we believe the process of dialogue should be based on national consensus, involve political parties and should be conducted in an environment free from violence," a statement by the Indian Embassy in Kathmandu said.

American and European Union representatives also backed the development.

Former prime ministers Sher Bahadur Deuba and Girija Prasad Koirala, however, seem cautious.

"We have to look at it carefully because two gun-barrels have agreed to meet at one point," said Koirala, who disapproves of King's Gyanendra's October 4 sacking of the Sher Bahadur Deuba government.

"I welcome the move, but the Maoists could again betray everyone like they did before [in November 2001]," said Deuba, who had initiated peace talks with the rebels in August 2001.

There are other sceptics, who believe the rebels are not serious.

"After all, their ultimate goal is to overthrow monarchy [a symbol of national unity in multi-cultural Nepal]," a foreign correspondent in Kathmandu pointed out.