“The International Monetary Fund today recognized the federal government of Somalia, headed by President Hassan Sheikh Mohamud, paving the way for the resumption of relations after a 22-year interval,” the IMF said in a statement on Saturday.
“The decision is consistent with broad international support and recognition of the Federal government,” the statement added.
However, the IMF said it will not lend money to Somalia until the country repays a $352 million debt it owes to the monetary body.
In September 2012, Somali MPs elected Hassan Sheikh as the new president of Somalia with a big majority.
The 56-year-old university lecturer garnered 190 votes against 79 for former President Sheikh Sharif Sheikh Ahmed in a second round run-off in the presidential election.
Somalia has not had an effective central government since 1991, when warlords overthrew former dictator Mohamed Siad Barre.
The weak Western-backed transitional government in Mogadishu has been battling al-Shabab fighters for the past five years and is propped up by a 10,000-strong African Union force from Uganda, Burundi, and Djibouti.