Health Canada is set to reduce spending on its cannabis program by CA$20.5 million ($14.6 million) over the next three years. This move is part of the federal government's "Refocusing Government Spending" initiative aimed at saving CA$15.8 billion over five years.

Canada's Cannabis Program Suffers Largest Spending Cuts

The planned cuts are the largest within Health Canada's contributions to the budgetary goal. Reductions include CA$4.7 million in 2024-2025, CA$7.5 million in 2025-2026 and CA$8.3 million in 2026-2027 and ongoing. Other affected areas are pharmaceutical drugs programs and management and oversight services.

In budget 2023, the government announced measures to scale back spending to pre-pandemic levels, according to StratCann. Documents tabled in the House of Commons revealed cuts to various federal programs, including affordable housing and the Department of National Defence. This information emerged in response to a question from NDP MP Peter Julian.

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A report by the Office of the Parliamentary Budget Officer outlined CA$500 million in announced reductions on consulting, professional services and travel for 2023-24. StratCann notes the report identified CA$179,000 in savings from Health Canada's cannabis program, stating it would not impact service levels.

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However, according to CTV News Ottawa, the Public Service Alliance of Canada expressed concerns that slashed budgets could potentially impact workforce stability and service delivery.

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Furthermore, these federal cuts come at a challenging time for Canada's legal cannabis industry. Leaders in the sector have criticized federal inaction on policy reforms, which has allowed the illicit market to thrive and legal sales to decline.

Statistics Canada reported a 2.8% drop from May to June 2024 and an 8.2% year-over-year decrease. Falling flower prices, while competitive against illicit alternatives, have further squeezed profit margins.

Omar Khan, a key figure at High Tide Inc. (NASDAQ:HITI), expressed frustration with the government's lack of engagement in an article published in late August. He criticized the absence of federal leadership, considering it has left the sector vulnerable.

As Canada approaches its next federal election in 2025, without decisive measures, the potential of its legal cannabis sector may remain unrealized.

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