Global Fund freezes Zambia aid, citing corruption

By Chris Mfula

LUSAKA (Reuters) - The Global Fund has suspended more than $300 million in health assistance to Zambia because of concerns about corruption -- the latest graft scandal to hit President Rupiah Banda before an election due next year.

The freeze, which is likely to affect the southern African country's fight against AIDS, tuberculosis and malaria, comes a year after Sweden and the Netherlands suspended $33 million in Health Ministry aid due to a missing $5 million.

The European Union has also halted aid earmarked for road construction because of concerns about graft.

"The national authorities have failed thus to provide assurance of appropriate action regarding the fraud against Global Fund grant programmes," the U.N.-initiated Fund said in a report seen by Reuters on Tuesday.

University of Zambia economist Oliver Saasa said the latest suspension should serve as another warning to Banda to get serious about graft, a growing concern to the donors who pay for 30 percent of the budget in Africa's biggest copper producer.

"This touches directly on life and should send a signal to the government on the importance of accountability," he said.

Banda's anti-corruption credentials have been called into question since a junior court in Lusaka cleared former president Frederick Chiluba of graft in August and the government refused to appeal the decision.

Chiluba was accused of stealing $480,000 in Treasury funds but the court said prosecutors had failed to prove their case beyond reasonable doubt, raising an outcry from anti-graft groups and the political opposition.

Banda's Movement for Multi-Party Democracy narrowly won an election in 2008 but is facing a serious challenge from populist opposition leader Michael Sata.

The Global Fund To Fight AIDS, Tuberculosis and Malaria gets the bulk of its funds come from the United States, Europe and Japan, and magnates such as Bill Gates also chip in.