BANDA ACEH, Indonesia, March 29 (Reuters) - President Susilo Bambang Yudhoyono praised on Sunday the rebuilding of Aceh and played down concerns over a peace deal in the province, as he highlighted Indonesia's stability ahead of polls next month.

Tensions have risen in the province in recent months with a number of attacks on members of Aceh parties blamed by some on disgruntled elements of the Indonesian military concerned that some former rebels have not dropped separatist aims.

Yudhoyono, who is seeking a second term in office, has visited Aceh twice in two months and has a key stake in ensuring the peace deal struck during his administration after the devastating 2004 tsunami remains on track.

Parliamentary elections kick off on April 9 followed by a key presidential vote on July 8. The polls will be key to dictating the pace of further reform in Southeast Asia's biggest economy.

Yudhoyono, who has been zig-zagging across the sprawling archipelago in the past few weeks to campaign, has also been trying to sell his government's success lifting economic growth, tackling poverty and fighting endemic graft.

Along with tee-shirts and other handouts, political rallies in Indonesia often use popular local singers, sometimes wearing sexy tight-fitting outfits, to drum up crowds.

In Aceh, the only province officially allowed to follow sharia law in secular Indonesia, the campaign rally was a little more reserved and started with a recital from the Koran. But the crowd, separated between men and head-scarfed women, began dancing and yelling as more local acts took to the stage. Water jets from fire hoses sporadically rained down to keep people cool under a blazing sun.

NEW HOMES, ROADS

Along with national parties, six local parties in Aceh including one formed by former rebels will contest the election.

Yudhoyono, 59, a former general known by his initials SBY, and his Democrat Party are currently well ahead in national polls, although local parties are expected to do well in Aceh. Aceh, an area rich in resources ranging from gas to coffee lying on the tip of Sumatra, suffered from three decades of bloody separatist conflict between the secessionist Free Aceh Movement (GAM) and the Indonesian armed forces.

But the December 2004 tsunami in which 170,000 people in Aceh died or went missing proved a shove for both sides to reach a peace agreement in 2005 giving it special status.

Yudhoyono reeled out a series of numbers highlighting the reconstruction of Aceh by the government and donors including 134,000 new homes, 3,600 km (2,237 miles) of roads and 20 ports. "Do you know why the world joined to help? Because Aceh is now peaceful," he told the crowd of flag-waving supporters during an intermission between local singers.

Most analysts do not see the peace deal in imminent danger, but there has been a pick up in violence in recent months, including murky shootings and grenade attacks.

"As political tensions have risen in Aceh, hostility between GAM and the TNI (Indonesian military) is at its highest point since the MOU was signed," the International Crisis Group said in a report last week, referring to a memorandum of understanding signed by GAM and the government in the 2005 peace accord.

Stability in Aceh is particularly crucial now since it needs to attract more investment as the government winds down the state reconstruction agency set up to rebuild the province after the tsunami and channel billions of dollars from donors.

The government also wants to use the Aceh model to resolve another long-running separatist conflict in the eastern area of Papua after recently opening talks with an exiled rebel leader.