The superstitious among Indonesia’s 200m people could be forgiven for thinking that the gods must be irate. By almost any standard, 1997 has been a very bad year, bringing drought, forest fires, air crashes, a currency collapse, stock exchange slump, and riots.

But much of the calamity has been man-made, and it has tarnished the reputation of President Suharto’s regime, at a critical moment for the ageing president and his supporters.

Mr Suharto, now 76, and the second-longest ruling head of state in the world after Fidel Castro of Cuba, is preparing for re-election by a hand-picked assembly next March. Few doubt his ability to win another term. Yet his hold on the archipelago of 13,000 islands is more tenuous than it has been for years.

His people have supported him, or tolerated him, because for 30 years he provided more food, more housing, more jobs and more stability.

Indonesia can boast an impressive economic growth record in recent years, and a degree of budgetary discipline and control of foreign borrowing which has earned the praise of the World Bank and International Monetary Fund.

That was before the currency turmoil broke in south-east Asia, precipitated by Thailand, and eventually engulfing Indonesia in late July. After two failed efforts to stem the speculation, President Suharto was persuaded in October to seek help from the IMF, the World Bank, the Asian Development Bank, and friendly governments.

The resulting $38bn-plus package of standby credit was the largest put together since the financial rescue for Mexico in 1995. It also implied a huge political climbdown for the president.

“An extremely proud man has been persuaded to ask for help,” according to one leading western donor. “Few people realise the enormity of the decision. They have just entered the highest stakes poker game they have ever played.”

It is a gamble which involves not only Mr Suharto, but his team of top advisers - including those brought back into government because of the crisis - and now the international financial institutions. They have put together enough potential support to see off any conceivable speculation in the market. They are seeking in return a range of highly sensitive economic and political reforms, involving the liquidation of ailing banks, much stricter supervision of the financial sector, and greater transparency in government decision-making.

The programme will depend on the continuing political stability of the country and Mr Suharto’s regime, at a time of unprecedented uncertainty. It implies action to curb corruption, both large-scale and petty, which rivals most other countries in Asia. And it will limit the influence of the president’s family and close associates, who have exploited their connections to build up powerful business empires in all sectors of the economy.

Until now, the president has failed to promote any obvious successor, allowing political speculation to spread. He has distanced the military, the source of his own authority and one of the few strong unifying forces in the country, from real power, but put nothing in its place. There is a strong whiff of fin de regime.

Against such a background, the string of disasters could scarcely have come at a worse time.

First came the disappearance in March of Michael de Guzman, chief geologist of Bre-X Minerals, who apparently plunged to his death from a helicopter flying over Kalimantan. Shortly after he disappeared, Bre-X had to admit that Busang, the gold mine he discovered and claimed to be the world’s largest, was a hoax, leaving the country’s mining reputation in tatters.

Then the spring election campaign for a new parliament was marred by riots, which cast a shadow over the landslide victory of Golkar, the government party, and raised concerns about President Suharto’s grip on his country.

Drought has severely affected the important agricultural sector, exacerbated by the El Nino weather phenomenon. It has put the winter rice crop, the largest of the three annual harvests, at risk. In the remote highlands of Irian Jaya, at least 500 people have died from diarrhoea and malaria, due to lack of clean water and reduced resilience. Some US meteorologists predict the dry weather could last until February.

Meanwhile, vast areas of Indonesia’s rain forests and peat bog, including some surface coal deposits, have been burning since July, set alight by careless farmers and plantation owners who want to clear land for agriculture. The smouldering peat and coal emitted a poisonous smog that spread across five south-east Asian countries.

The smoke was also a likely factor in the worst air crash in Indonesia’s history. A Garuda Airbus A300B-4 jetliner lost direction in the haze and went down in the mountains of Sumatra in September, killing all 234 people on board.

By this time the rupiah and the stock market had also crashed. First, the currency toppled, followed by a banking crisis, warnings of a drastic squeeze on corporate profits and then a slump on the stock market. A government and industry used to high growth and a stable currency did not know how to respond when both disappeared overnight.

In September, the government pledged economic reforms and austerity measures, including delays for infrastructure projects worth $37bn. The announcement briefly revived the rupiah and the stock market, but lack of a follow-up with more detailed reform measures drove down both the markets until both lost more than a third of their value.

In early October, the government recalled 70-year-old Widjojo Nitisastro, doyen of the country’s economic advisers, from retirement to head its negotiating team, and called in the IMF.

“It is not that we want them to change our policy, but we want them to show their support,” said Sudradjad Djiwandono, governor of Bank Indonesia. He claimed to have $20.5bn in reserves - enough to cover five months of imports - and $2bn in untouched standby loans from banks worldwide.

Mr Widjojo and his team saw the crisis as an opportunity to persuade Mr Suharto to take the painful steps he had previously shunned. The IMF and World Bank agreed. They offered Mr Suharto more money than he had asked for, but in return demanded economic reforms far tougher than he had contemplated. Two weeks later the government announced a reform package which, despite some compromises, went further than expected.

Indonesia’s commitments include: cutting import tariffs and phasing out export levies; phasing out all non-tariff barriers within three years; introducing a transparent government procurement policy before the end of this year; establishing an independent privatisation board; moving extra-budgetary funds into the budget; liberalising foreign investment; removing tax exemptions for pet projects; requiring public reports on the financial status of state enterprises; and speeding up privatisation.

The government’s most visible move to date has been the closure of 16 banks, including several owned by relatives and close associates of President Suharto. Officials also pledged to improve monitoring of the commercial banks and enforce tougher capital requirement rules.

“In terms of reforming the financial sector, it is a quantum leap forward,” said Dennis de Tray, country director for the World Bank. “In the real sector, it cracked some important doors. But certainly more remains to be done.”

Diplomats say that cuts in import tariffs for ethylene and propylene, designed to protect a petrochemical plant controlled by a son of Mr Suharto, were curbed. Reforms of the food import and distribution agency Bulog were also limited, partly to avoid upsetting staple food supplies at a time when severe drought is crippling harvests.

The IMF and the World Bank dropped a request for the lifting of fuel subsidies after the government said that this would be too politically sensitive on the eve of presidential elections in March.

The success of the IMF programme, and the future of the Suharto regime, are now bound together. Few doubt that Indonesia can and will return to the path of rapid growth. But it will be a painful process.