Zim returns $7.3m to aid group

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New Delhi - Zimbabwe's central bank has returned $7.3m to an international aid agency that it confiscated last year, an official said on Friday.

The agency, the Global Fund, had announced a day earlier that it would not give any new funds to Zimbabwe to fight Aids, tuberculosis and malaria until the money was returned.

"The Global Fund greatly appreciates this development which will accelerate the live-saving activities of the malaria, tuberculosis and HIV programmes in Zimbabwe," Michel Kazatchkine, the group's executive director, said on Friday.

The group's board, which was meeting on Friday in the Indian capital, was expected to consider a request by President Robert Mugabe's government for an additional $400m in health care funds.

Kazatchkine said the central bank had also agreed that recipients of aid from the Global Fund would be able to use US dollars for all transactions in Zimbabwe, eliminating foreign exchange and inflation risks.

Zimbabwe has an extreme economic crisis, including one of the world's highest inflation rates. Last year, the central bank confiscated US dollars being held in local bank accounts, including about $12m belonging to the Global Fund, Kazatchkine said in a statement.

The central bank earlier returned $5m of the seized money, he said.

Zimbabwe has one of the world's worst Aids epidemics, a collapsing health infrastructure and a growing hunger crisis. The country's cash shortages and banking problems are severely hampering efforts to feed the hungry and care for the sick, according to several aid agencies.

The Global Fund, conceived in 2001 when the Group of Eight leading industrialised nations pledged to step up funding to fight Aids and other global epidemics, is primarily a fundraising and disbursing agency based in Geneva.

Mugabe, in power since independence from Britain in 1980, blames Western sanctions against his government for his country's economic crisis. But critics point to corruption and mismanagement under his autocratic leadership.

- AP