The international spotlight is back on East Timor, as an increasingly tense standoff between rebel leader Alfredo Reinado and the government raises fears of an escalation of violence ahead of April's presidential elections.

Thousands of furious supporters of Reinado - who led a revolt that plunged the fledgling nation into chaos last year - burned tyres and threw stones in the capital on Monday to protest against a failed weekend raid by international troops on the fugitive's hideout.

President Xanana Gusmao has ordered security forces to arrest Reinado following accusations the former army major stole weapons from a police post last month.

But Reinado is warning of a bloody uprising if anything happens to him. "People will start killing each other if anything happens to me ... There will be civil war," The Sydney Morning Herald quoted him as saying.

The rebel leader has been on the run since he escaped from jail in the capital Dili last August along with 50 other inmates.

But are these little more than overblown threats? U.N. spokeswoman Allison Cooper told the Herald that, while the security situation is volatile, it isn't out of control. She rejected claims civil war could erupt if Reinado were hurt or killed, saying: "At its worst, it's sensationalist, at its best it's just inaccurate."

Nonetheless, Australia has announced it will evacuate non-emergency staff and families from its Dili embassy. "The security situation is volatile and there is a high risk of violent civil unrest. There is an increasing likelihood that Australians could be specifically targeted," Foreign Minister Alexander Downer said in a statement.

Australians lead an international peacekeeping force of around 1,000 soldiers, whose presence Reinado argues amounts to an illegal invasion.

The troops were sent to East Timor to prevent further outbreaks of violence after deadly riots last April and May, sparked when the government dismissed 600 troops protesting over alleged discrimination against soldiers from the west of the country.

100,000 STILL DISPLACED

At the time, some 150,000 people - 15 percent of the population - fled their homes in the capital, and around 100,000 are still displaced. They can't go home because their houses were damaged or destroyed, and are living either in camps or with host families.

Violence over the past month has caused 5,000 more to head to camps for displaced people in the capital, adding to the 25,000-29,000 already sheltering there, according to the United Nations, which has put more police on the streets ahead of the elections.

Top U.N. official Finn Reske-Nielsen has cited rice shortages as another reason for the violence, and the government and U.N. agencies are selling rice to ease the problem.

In its January appeal for funds, the United Nations noted malnutrition remains high, and close to half the population have trouble getting hold of enough food.

East Timor is one of the poorest countries in the world, and one-fifth of its people live on less than a dollar a day.

Unemployment among young people - who make up around 60 percent of the population - is a major problem, which is reflected in high levels of gang-related crime and violence.

In a recent interview, the outgoing head of the International Committee of the Red Cross delegation in the country, Daniel Cavoli, said the humanitarian situation was "very precarious".

"A great many people have yet to return to their homes and a lot more needs to be done if the political community and the people of Timor-Leste are to recover the confidence they need to build a viable future," he said. "A crucial challenge will be to ensure that young people, too many of whom are jobless today, will be given the means to live their lives with dignity."

Even if a spiral of violence is avoided and forthcoming elections go ahead as planned, it's clear the next government faces huge challenges in helping displaced Timorese get their lives back on track and putting the country on a path to development.

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