The loss of Baidoa in central Somalia is a major blow for the Al Qaeda-backed Al-Shabab rebel group which is also battling Kenyan troops to hold on to territory in southern Somalia and against African peacekeepers in pockets of the capital.

“We have taken Baidoa. There was no resistance from Al-Shabab,” said Abdifatah Mohamed Gesey, a senior commander of the advancing Somali government soldiers.

Al-Shabab said its withdrawal from the city had been aimed at avoiding casualties.

“Our fighters left town this morning without fighting. Now we are surrounding the town,” said Sheikh Abdiasis Abu Musab, Al-Shabab's spokesman for military operations.

“Baidoa will be a cemetery for the Ethiopians.”

Earlier on Wednesday, a Baidoa resident who gave his name as Farah told Reuters no Al-Shabab fighters were visible in the streets.

“Al-Shabab have run away to the Idaale jungle. Other residents tell me Ethiopian troops have reached the corners of the city,” Farah told Reuters by telephone.

Ethiopia's forces launched a push south toward Baidoa through the neighbouring Bay and Bakool regions on Tuesday, making swift progress with the insurgents offering minimal resistance, said officials.

Located about 250 km north west of Mogadishu, Baidoa is considered the most important rebel base after the southern port city of Kismayu. Baidoa hosted Somalia's interim government from early 2006, when another Islamist administration was battling warlords for control of Mogadishu, until the turn of 2008/2009 when Al-Shabab seized the city and expelled the transitional government.

Ethiopia moved troops across the border into Somalia in November to open up a third front against the militants already suffering financial constraints after pulling most of their fighters out of Mogadishu and internal divisions. On Wednesday morning, witnesses said Al-Shabab had also surrendered the town of Berdale about 60 km for Baidoa.

Berdale resident Ali Mohamed Abukar said a “huge number” of heavily armed foot soldiers and columns of armored vehicles and tanks had rolled into Berdale, a day after wresting control of the town of Yurkud about 50 km away.

“They were so many. They ordered as to remain calm and they headed towards Baidoa,” Abukar told Reuters by telephone.

Meanwhile, the UN Security Council unanimously agreed Wednesday to increase the African Union force in Somalia from 12,000 to 17,731 troops.

A resolution passed by the 15-nation council gave the African force a tougher mandate to attack Al-Shabab and substantially increased international funding for the military operation.

The resolution was prepared by Britain ahead of an international conference in London on boosting support for efforts by Somalia’s transitional government to re-establish control in the country.

Somalia has had no effective government for more than two decades and in recent years Al-Shabab and other militant groups have taken an increasing hold on large parts of the country.

The African Union force, AMISOM, has been helping the government to fight back over the past year, however. The force had an upper limit of 12,000 but can now call on extra troops following the new resolution.

Kenyan troops already in Somalia will now come under AMISOM command. Ethiopian troops, which have taken the Al-Shabab stronghold of Baidoa, will not be part of the force, however. The Security Council ordered AMISOM to move into new parts of Somalia and gave it a direct mandate to go on the offensive against Al-Shabab.

AMISOM was “authorized to take all necessary measures” with Somali security forces “to reduce the threat posed by Al-Shabab and other armed opposition groups in order to establish conditions for effective and legitimate governance across Somalia,” said the resolution.

AMISOM is run by the African Union but paid for by the United Nations.

The resolution increased international funding for its logistics. Diplomats said the annual cost would increase from about $250 million a year to about $550 million.

The European Union is the biggest contributor to the AMISOM fund.