Botswana said on Tuesday it had declined an option to lift its stake in diamond giant De Beers, leaving global miner Anglo American with the full $5.1-billion price tag for a buy-out of the remaining shares owned by the Oppenheimer family.
Diamond-rich Botswana had a right to raise its shareholding in the company to 25% from 15%, a move that would have cost it $1.3-billion at a time when it is striving to contain government spending.
The company and the country are deeply entwined. De Beers is the world's largest diamond producer by value and more of the precious gems come from sparsely populated Botswana than any other nation.
But deepening the relationship is too costly at the moment for the southern African government.
The ministry of minerals said in a statement the price was equal to about 10% of the country's gross domestic product, "a large cost for a country whose government budget is still in deficit, and is trying to bring the budget to balance within a year and a half."
It said "such a purchase would inevitably push back the restoration of balancing the budget and drain the country's international reserves."
The move would have also set back efforts to diversify Botswana's economy away from its heavy reliance on diamonds.
Anglo formally offered the Botswana government a pro-rata share of the Oppenheimer family's 40% stake under a long-standing pre-emption agreement.
First-half profit halved at De Beers as trade buyers were held back by a lack of funds and worries over consumer demand.
Anglo last week posted steeper-than-expected drop in profits as faltering global economic growth hit prices but it has put its long-term faith in diamonds.