Nairobi/Djibouti  - The Somali government and opposition figures have signed an eleventh-hour peace deal aimed at ending 17 years of conflict, but Islamic insurgents at the heart of a recent escalation in violence are not included in the agreement.

The United Nations envoy to Somalia, Ahmedou Ould-Abdallah, who called off the talks in neighbouring Djibouti on Sunday after the opposing factions refused to meet, told the BBC that a deal had been agreed late on Monday night.

"It took eight days to attend workshops, to live in the same hotel, but avoiding each other. Finally they met ... confidence resumed slowly, and we have to support and nurture that renewed confidence," he said.

The government and the Alliance for the Re-Liberation of Somalia agreed on a three-month ceasefire at the end of which Ethiopian troops would leave Somalia.

However, the deal could have little effect on the ground as hardline opposition figures and Islamic fighters in Somalia have poured scorn on the peace talks.

Nonetheless, the African Union (AU) hailed the deal as a "significant step" forward.

"The AU Commission hails the ... spirit of compromise demonstrated by the two parties, and strongly urges all other relevant Somali actors to ... commit themselves to the peaceful and negotiated settlement of the conflict in their country," the AU said in statement.

The AU also said it would continue to support stabilizing Somalia and called on the international community to increase its efforts.

African Union peacekeepers from Uganda and Burundi are present in Somalia, but they number only a few thousand - around a quarter of the force supposed to be on the ground - and have failed to stem the violence that is causing heavy civilian casualties.

Roadside bombings and fierce battles in populated areas have become an almost daily occurrence. Dozens were killed over the weekend in heavy fighting in the capital city Mogadishu alone.

Somalia has been in a state of anarchy since the overthrow of dictator Mohamed Siad Barre in 1991, but aid agencies are warning that the conflict is worsening and that the Horn of Africa nation is facing a massive humanitarian crisis.

Fighting has intensified since transitional federal government troops and their Ethiopian allies in late 2006 wrested control of Mogadishu from the Union of Islamic Courts (UIC).

Al-Shabaab, the armed wing of the courts, has since waged a bloody guerrilla war that shows no sign of letting up. The group said it would step up attacks after an US airstrike killed its leader Aden Hashi Ayro in early May. (dpa)