Canada has resumed its financial support of the Palestinian Authority with an immediate contribution of $8 million, the federal government announced on Monday.

"In light of the new Palestinian government's commitment to non-violence, recognition of Israel, and acceptance of previous agreements and obligations, and in recognition of the opportunity for a renewal of peace efforts, Canada will provide assistance to the new Palestinian government," Foreign Affairs Minister Peter MacKay said in a statement.

But MacKay added he recognizes the Palestinian government still faces "fundamental challenges" in governance and the rule of law, and said he hopes the funds will help with reforms.

Canada will make an immediate contribution of $8 million through the Canadian International Development Agency, the government said.

Minister of International Cooperation Josée Verner said an additional $1 million will go to the International Committee of the Red Cross for humanitarian assistance.

"Canada is also very concerned about the humanitarian situation of the Palestinians, especially in Gaza," she said in the release.

According to the Canadian government, Canada provided more than $30 million in humanitarian assistance to Palestinians, including refugees, in the last fiscal year.

Canada was one of the first Western countries to cut off funding after Hamas, considered a terrorist group by some, won the January 2006 Palestinian election.

The Western boycott was one of the factors that prompted Hamas to form a coalition government with rival Mahmoud Abbas and his Fatah party in March 2007.

That unity government fell apart last month after Hamas launched a six-day gun battle and seized the Gaza Strip. In response, Abbas ousted Hamas from the unity government, which still has control of the West Bank.

With files from the Canadian Press