MOGADISHU, Somalia - Islamic insurgents rained down mortars, rocket-propelled grenades and machine-gun fire on government-allied troops Friday, a day after the government began an offensive to quash the growing insurgency.

Somali insurgents raise their AK-47 rifles in celebration as they roam through Shirkole neighbourhood in Mogadishu March 29, 2007. [Reuters]

Hundreds of soldiers from neighboring Ethiopia, who are here to protect the fragile Somali government, were under withering attack early Friday.

"Ethiopian troops using tanks are in fierce face-to-face fighting with hundreds of Somali gunmen since dawn," said Khalif Mohamed Mumin, who was abandoning his home in search of safety. "Residents are fleeing in all directions to escape the shelling."

A day earlier, fighting killed at least 10 people and wounded 50. Bloodied civilians were seen running through the streets of Mogadishu.

Somalia government, with crucial support from Ethiopian troops, only months ago toppled the Council of Islamic Courts, the militia that had controlled Mogadishu for six months.

But insurgents with links to the Islamic group have staged attacks nearly every day on government and Ethiopian troops. Last week, a cargo plane carrying equipment for African Union peacekeepers here was shot down by a missile during takeoff, killing the 11-person crew.

The United States has accused the Islamic group of having ties to al-Qaida. On Thursday, a White House report said that despite recent setbacks to Islamic radicals in Somalia, foreign terrorists still are able to find a haven there because of the country's lack of governance, which contributes to a growing security threat throughout East Africa.

The report, submitted to relevant congressional committees, said several al-Qaida operatives have used Somalia as a base of operations, including the perpetrators of the 1998 bombings of two US embassies in East Africa and the 2002 attacks against an Israeli airliner and a hotel in Kenya.

"The individuals pose an immediate threat to both Somali and international interests in the Horn of Africa," the report said.

The UN's refugee agency said 57,000 people have fled violence in the Somali capital since the beginning of February, including more than 10,000 people who fled the city in the last week.

The figures were based on information provided by non-governmental organizations in Somalia, the UN High Commissioner for Refugees said.