* Lungu says IMF can end aid talks if they deem fit
* Opposition trying to force coalition govt -Lungu
* Opposition fears its members will be arrested
* Zambia is Africa's No. 2 copper producer (Adds Lungu, opposition, analyst quotes)
By Chris Mfula
LUSAKA, July 6 (Reuters) - Zambian President Edgar Lungu said on Thursday he had invoked emergency powers to deal with "acts of sabotage" by his political opponents, after fire gutted the country's biggest market.
The main opposition party said his use of emergency powers was unnecessary and was a ploy to make it easier for police to arrest its supporters.
Lungu said the measure would safeguard investments in the country, which is Africa's second-biggest copper producer and is currently in talks with the International Monetary Fund over a financial aid package. He said the IMF was free to terminate the negotiations if it considered his actions wrong.
Political tensions in Zambia, seen as one of Africa's more stable and functional democracies, have been rising since the arrest on treason charges of main opposition leader Hakainde Hichilema in April. He narrowly lost to Lungu in a bruising election last year.
"This power (state of emergency) I have invoked is only for seven days," Lungu said, a day after saying that the fire in the capital was politically motivated arson.
"Parliament will within the next seven days determine whether it will be there for one week, one month, three months or six months."
Lungu said the powers would not disrupt normal life, but were aimed at those who posed a danger to public security.
Under state of emergency laws, police can prohibit public meetings, detain suspects longer than usual, search without a warrant, close roads, impose curfews and restrict movements.
The IMF has been in talks with Zambia over plans for up to $1.3 billion in a three-year credit facility to help plug a budget deficit of around 7 percent.
"I don't think the IMF would like to see this country go up into flames. The measures we are taking are intended to safeguard the IMF programme, if it comes to be," he said.
"If the IMF feels we have gone beyond the norms of good governance, they are free to go. I am sure the IMF would like to come to a country which is stable. If they think I have gone astray, let them go," Lungu said in response to a question.
Lungu said the fire, which destroyed the southern part of City Market in the capital Lusaka on Tuesday, "bordered on economic sabotage" and was aimed at making the country ungovernable.
Nobody was killed or injured in the blaze.
Hichilema, along with five others, is accused of trying to overthrow the government after a convoy of vehicles in which he was travelling failed to make way for the president's motorcade.
Lungu said there was no tension in the country but "acts of terrorism", which he blamed on the opposition.
"It is a systematic approach by the opposition to stampede us into talks so that we renegotiate the results of the last elections," he said.
"It is a strategy to create terror and panic so that they can say there is tension in the country, let us talk. We follow a system of winner takes all. Don't force us to form a government of national unity," Lungu said.
Hichilema's United Party for National Development (UPND) said it was unnecessary for the president to invoke such powers because the police already have enough power to deal with crime.
"For the state to go that route, we think there is a hidden agenda to have more of our members arrested," UPND spokesman Charles Kakoma said, adding that the party would issue a more comprehensive statement over the next few days.
"The police will now find it easier to arrest and indefinitely detain our members."
Unknown people destroyed electricity pylons on a high-voltage line a week ago, leading to a power blackout in some mining areas. Fires have been started in courtrooms and a building belonging to the ministry of education.
One analyst said police would target opposition leaders.
"It will not be surprising if more UPND leaders are arrested and implicated in acts of sabotage," said analyst Neo Simuntanyi of the Centre for Policy Dialogue, a local research institute.
"My fear is that UPND got almost half the votes in the last elections and the impending arrests will only heighten tension by antagonizing almost half the population of the country." (Writing by James Macharia; Editing by Catherine Evans)