Scores of people have been killed in Burma as sectarian violence escalated despite the declaration of a state of emergency in the western state of Arakan.

A Buddhist man brandishes a machete amid rising tensions in Sittwe, Burma. Photograph: Soe Zeya Tun/Reuters

A strict curfew was imposed at the weekend on four towns, including the state capital Sittwe, but clashes between Buddhists and Muslims continued late into Sunday night.

The Muslim district of Nazir in Sittwe was set ablaze in the latest of a series of arson attacks across the state carried out by groups on both sides.

Chris Lewa, head of the Arakan Project, an international agency monitoring Burma's westernmost state, said witnesses had reported between 50 and hundreds dead.

Multiple reports from sources on the ground alleged that security forces had opened fire on Muslims in the town of Maungdaw, where foreigners are forbidden to enter.

An Arakanese agency worker living in Bangkok told the Guardian her family home in Nazir had been razed and a family friend, a former politician, had been killed. Her father was missing, while three of her friends, all former staff at the office of the UN high commissioner for refugees (UNHCR), were also detained. "It seems police are targeting the educated people like they did in Cambodia," she said.

A Maungdaw resident, who asked not to be named, said police had shot dead two Arakanese looters during the night. "Muslim houses in Bhumu village [near Maungdaw] are on fire and other houses in Ward 5 are also on fire". He added that the arson was being carried out "in front of the police" and members of an Arakanese paramilitary group known as Lun Htin.

EU spokesperson Maja Kocijanic said: "We believe that the security forces are handling this difficult intercommunal violence in an appropriate way."

UNHCR has evacuated staff from Maungdaw, at the centre of last week's unrest. Locals who had been sheltering in the UNHCR compound were forced to flee.

The turmoil was triggered by the killing of 10 Muslims aboard a bus in central Arakan last week. The attack followed the alleged gang rape and murder of an Arakanese woman on 28 May by three Muslim men, who have since been detained.

Six boats carrying wounded escapees from Sittwe are stranded at the mouth of the river Naf, which separates Burma and Bangladesh. Lewa said Bangladeshi border units were barring them from docking, and Bangladeshis who tried to send assistance were blocked.

The UNHCR spokesperson in Geneva, Andrej Macehic, said he was awaiting a response from Dhaka, having lobbied the Bangladeshi government "to allow safe haven on its territory for those who need immediate safety and medical assistance".

President Thein Sein last night opened the door to military intervention by declaring the first emergency rule since coming to power in March last year. Observers fear the unrest could embolden Burma's military to take greater control of the country after it handed power last year to a nominally civilian government.

The opposition leader, Aung San Suu Kyi, is due to travel to Europe this week but may cancel if the situation deteriorates.