COLOMBO, Sri Lanka -- Sri Lankan police have been ordered to go on the offensive and use live ammunition to stop rioting, a top official told AFP Wednesday, after another night of sporadic arson attacks.

Police say eight people have died since Monday, when frustration at the island's dire economic crisis erupted into violence between supporters and opponents of President Gotabaya Rajapaksa.

Even with a curfew imposed and thousands of security forces told to "shoot on sight" to prevent further unrest, a luxury hotel said to belong to a Rajapaksa relative was set ablaze Tuesday evening.

"It is no longer spontaneous anger, but organised violence," the senior security official said on condition of anonymity.

"If the situation is not brought under control, there could be total anarchy."

The security official said the 85,000-strong police "have been asked to adopt an offensive stance", and have been ordered to use live ammunition against troublemakers.

A curfew imposed soon after violence broke out on Monday was due to be lifted on Wednesday morning, but it was extended by another 24 hours due to continuing violence.

As well as the hotel fire, on Tuesday evening police said they shot into the air at two locations to disperse mobs trying to torch vehicles.

They also stepped up security for several judges, saying they were targeted too.

The unrest in Sri Lanka has spiralled after Monday's events, when government supporters with sticks and clubs attacked demonstrators in Colombo protesting peacefully for weeks over the economic crisis and demanding President Rajapaksa's resignation.

Mobs then retaliated across the country late into the night, torching dozens of homes of ruling-party politicians and trying to storm the prime minister's official residence in the capital.

Mahinda Rajapaksa, the president's brother, had to be rescued in a pre-dawn military operation on Tuesday after thousands of angry protesters stormed his residence hours after his resignation as prime minister.

Sri Lanka had just opened staff-level talks with the International Monetary Fund on a possible bail out after the country ran out of dollars to import even the most essential items.

Echoing calls from the UN rights chief and the European Union, the United States on Tuesday said it was both concerned with the escalating violence and the deployment of the military.

"We stress that peaceful protesters should never be subjected to violence or intimidation, whether that's on the part of the military force or civilian units," State Department spokesman Ned Price told reporters.