HARARE (Reuters) - An official in Zimbabwe's MDC party has been charged with planning terrorism and insurgency just days after the opposition joined in a unity government with President Robert Mugabe, his lawyer said on Sunday.

The development threatens the credibility of the new government, whose formation after long negotiations was aimed at leading Zimbabwe out of a political and economic crisis.

MDC Treasurer General Roy Bennet is expected to appear in court on Monday to face the charges, his lawyer, Trust Maanda, said.

Bennett, who was meant to be deputy agriculture minister in the new administration, was arrested before new ministers were sworn in on Friday.

The MDC had said Bennett was charged with treason.

"They have now preferred charges of insurgency or attempting to commit acts of insurgency, terrorism and banditry," Maanda said.

Bennett is accused of being involved in funding for arms and explosives to be used to sabotage essential services, Maanda said. Bennett has denied the charges and believes they are politically motivated, he said.

While the MDC has condemned Bennett's arrest, it has not indicated if it would take any strong action that could endanger the unity government formed after months of deadlock over implementation of a September power-sharing deal.

Bennett is being held at a police station in the eastern city of Mutare, the MDC said. He is in good spirits.

He had been living in exile in South Africa after fleeing Zimbabwe two years ago because police wanted to question him in connection with the discovery of an arms cache.

Police officials have not been available for comment on Bennett's case.

Foreign investors and Western donors want concrete signs of stability in Zimbabwe. They have made it clear that funds will not flow to the nation until a democratic government is created and economic reforms are made.

Political tensions are not the only concern.

Both Mugabe and MDC leader Morgan Tsvangirai have named party stalwarts to the cabinet rather than technocrats seen as having the expertise Zimbabwe needs to escape its crisis.

Zimbabweans face unemployment above 90 percent and prices that double every day. Half the 12 million population need food aid and a cholera epidemic has killed more than 3,500 people.

Some ZANU-PF members in the new cabinet have held ministerial posts since independence from Britain in 1980, when Mugabe came to power.