The case could threaten international aid flows into the West African country which is seeking additional support from donors to develop its economy and improve security in a border area where al Qaeda cells operate.

"There have been seven arrests," the source said, who did not want to be named, adding that the Health Ministry's director of finance was among those detained.

The arrests come after Geneva-based international aid group Global Fund conducted an audit of its programme in Mali, where it has disbursed more than $76 million since 2004 to combat malaria, tuberculosis and HIV/AIDS.

A spokesman, Andrew Hurst, said more than $300,000 of the group's aid grants had been confirmed as stolen and has since been returned by the Mali government. He said the figure could grow as the investigation continues.

He said Global Fund, which has approved funding of $19 billion in 144 countries, had not suspended aid grants to Mali over the case and was aware authorities had made some arrests.

"We would not consider such action until we have a complete investigation," he said. Global Fund has, in the past, temporarily suspended aid grants to Chad, Mauritania, Senegal and others over embezzlement and poor performance.

Mali's President Amadou Toumani Toure during a trip to Europe this week called on donors to boost aid, citing a worsening security situation in the Sahel region after a slew of al Qaeda-linked kidnappings.