The IMF and World Bank have resumed formal engagement with Venezuela. The move further legitimizes the Latin American country's interim government and paves the way for financial support.

The International Monetary Fund (IMF) and the World Bank announced Thursday that they had resumed dealings with Venezuela after a seven-year pause over government recognition issues.

The Latin American country's relations with the financial institutions collapsed in 2019 when the IMF recognized the opposition, which controlled the parliament, as the legitimate government.

What Did the IMF and World Bank Say?

In recent days, the IMF polled its members on whether they saw acting President Delcy Rodriguez as the legitimate leader of Venezuela.

"Guided by the views of International Monetary Fund members representing a majority of the IMF's total voting power, and consistent with long standing practice, the Managing Director Kristalina Georgieva today announced that the IMF is now dealing with the Government of Venezuela, under the administration of acting President Delcy Rodriguez," the IMF said in a statement.

The World Bank Group followed suit, saying that it was resuming dealings with the government of Venezuela under Rodríguez.

Venezuela has been a World Bank member since 1946. According to the World Bank statement, the country's last loan was in 2005.

What Does this Mean for Venezuela?

The restoration of formal engagement clears the way for a full IMF assessment of the Venezuelan economy and could subsequently unlock billions of dollars in funding through frozen special drawing rights.

The institutional recognition could also allay fears among foreign private investors who had been hesitant to bet on the economically beleaguered nation.

"We have resumed Venezuela's representation in this international organization...we are normalizing all processes that involve Venezuela's rights in the organization," Rodriguez said during an address on Venezuelan state television.

"This is a very important step for the Venezuelan economy," she added, thanking US PresidentDonald Trump and Secretary of State Marco Rubio,among others, for their help in normalizing the relationship with the IMF.

Thursday's move comes after the Trump administration in January deposed President Nicolas Maduro on January 3, with US forces conducting a raid on Venezuela's capital Caracas.

The US has since been working with Rodríguez. Washington is also actively seeking to expand US presence in Venezuela's oil and mining sectors.