The Biti probe follows a police bid last year to arrest Prime Minister Morgan Tsvangirai and nephew Hebson Makuvise, Zimbabwe's ambassador to Germany, in a $1.5-million fraud case.

It was alleged Tsvangirai double-dipped into state funds by securing first $1.5-million and then $1-million to buy an up-market house in Kew Drive in Highlands, Harare.

Criminal Investigation Department (CID) detectives opened a criminal docket and are still probing the premier in a case being handled by police commissioner-general Augustine Chihuri. CID chief superintendent Alison Nyamupaguma is leading the investigating team.

Officials told the Sunday Times this week Biti was being investigated over the $500-million. He and Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono fought bitter battles to get control of this money.

"The minister of finance has been under investigation since last year by police and some government officials over the usage of the money, which came from the IMF in 2009. It is alleged the minister was involved or knew about how part of the money was mishandled at some banks," a senior government official said.

"The line of investigation is that part of the money, which was deposited into banks owned or run by the minister's friends, was mishandled through means that border on unauthorised or unlawful practices, including creaming-off interest accrued for individual benefit. Police want to know if the minister was involved in, or was aware of, these activities."

Another official said the team probing Tsvangirai was "on Biti's case".

Biti was not available for comment, but a senior finance official said on Friday he was "not worried about it".

Zimbabwe got $512.3-million in special drawing rights in 2009 after the IMF injected $283-billion into the global economy to provide liquidity and boost member countries' foreign exchange reserves at the height of the financial crisis.

As soon as the money was in the RBZ coffers, Biti and Gono started fighting over it. They engaged the IMF separately. Biti said he was the "sole authority" on how the money would be used. Most of it would go to infrastructure development and exporters' lines of credit. He could channel some to budgetary support.

Biti also told Mugabe and cabinet that he wanted Zimbabwe to use the money to clear its arrears with international financial institutions in a debt-reduction strategy. Zimbabwe's debt overhang tops $8-billion.

But Gono wanted the money for mining, manufacturing, tourism and recapitalisation of public enterprises like the national railways and the Zimbabwe Electricity Supply Authority, Ziscosteel and Hwange Colliery, among others. He also wanted to use some to repay government debt to corporates, NGOs and the IMF.

Biti has said the IMF money was used for several projects, although the IMF at one time withheld $215-million as national reserves, with another $140-million earmarked for Zimbabwe's obligations with the IMF poverty-reduction growth facility.

About $150-million was used for agricultural inputs in 2009 and 2010, $50-million for summer cropping, $80.46-million for infrastructure and $19.54-million for the Zimbabwe Economic and Trade Revival Facility administered by Interfin Bank.

"Police are interested in money deposited in banks like Interfin and are following the trail," an official said. "They suspect fraudulent activities in the handling and management of these funds."

By The Times (SA)