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 programs in Zimbabwe,” Michel Kazatchkine, the group’s executive director, said Friday.

The group’s board, which was meeting Friday in the Indian capital, was expected to consider a request by President Robert Mugabe’s government for an additional $400 million 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 U.S. 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 U.S. dollars being held in local bank accounts, including about $12 million belonging to the Global Fund, Kazatchkine said in a statement.

The central bank earlier returned $5 million 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 industrialized 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.

The dispute threatens another request by President Robert Mugabe’s government for an additional $400 million in health-care funds.

Zimbabwe has one of the world’s worst AIDS epidemics, a collapsing health infrastructure and a growing hunger crisis.

In addition to the issue of corruption, 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 to Fight AIDS, Tuberculosis and Malaria says $7.3 million of the $12.3 million it deposited into its Reserve Bank of Zimbabwe account last year did not go to fight the three diseases that are devastating southern Africa.

It did not say where the money went. Repeated attempts Monday to reach Zimbabwean health, Central Bank and other officials for comment were not successful.

Mugabe’s government has promised to return the $7.3 million by Thursday, Global Fund Communications Director Jon Liden said Monday in an interview from Geneva. On Friday, the fund’s board is to decide whether to grant a Zimbabwean government request for about $400 million in additional funds.

Liden said he could not predict what the fund’s board would decide, but added “this kind of behavior by the government of Zimbabwe does not help” efforts to get donations.

The Global Fund was conceived in 2001 when the Group of Eight leading industrial countries pledged to step up funding to fight HIV/AIDS and other global epidemics. It 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 extreme economic crisis. But critics point to corruption and mismanagement under his increasingly autocratic leadership.

Hopes were raised when Mugabe signed a power-sharing arrangement with his political opponents in September, but little progress has been made toward setting up a unity government.

Other aid groups have reported difficulties assessing their own funds once they are deposited in Zimbabwe’s central bank. They, like Zimbabwean businesses and ordinary residents, are subject to limits on cash withdrawals and shortages of the Zimbabwean dollar as the economy collapses.

Officially, annual inflation in Zimbabwe is 231 million per cent, but some experts put it much higher.

Spiralling inflation means the value of a check can plummet in the days it takes for banks to process it. Phil Thomas, who directs local operations of the Irish aid group Goal, said food distribution workers are now demanding cash.

Goal distributed UN food aid to 300,000 Zimbabweans last month, and hoped to reach 500,000 this month, but Thomas said currency difficulties were getting in the way.

“It’s a challenge, but we are still operating,” Thomas said in a telephone interview.

Kenneth Walker, a spokesman for CARE, said his aid group had hoped to feed half a million Zimbabweans, but has had to cut its goal by half because of the country’s currency chaos.

In the meantime, Zimbabwe’s health issues keep multiplying. Health authorities on Monday said nine people have died in the country’s capital in last week from cholera, bringing the total to at least 130 deaths nationwide in recent weeks. Health officials also said clinics in southern Zimbabwe have no drugs to treat victims of an outbreak of rabies.

Lovemore Madhuku, head of the independent National Constitutional Assembly, called for the formation of a transitional government to urgently tackle the country’s food and health problems.

His alliance of civic and labor groups plan street protests starting Nov. 11 _ protests that have been violently dispersed by police in the past.

“Let’s see how the police react,” he said Monday. “There is no government. The country is in chaos. People are dying. People are suffering. There’s no food.”