Ethiopia is at a critical crossroads with a burgeoning population, a severely depressed national economy, insufficient agricultural production, and a minimal number of devel- oped energy sources. This study assesses how investment in and management of water resources, together with related policy reforms, may mitigate the negative effects of hydrologic variability on the performance and structure of the Ethiopian economy. This is accomplished by identifying interventions both aimed at managing hydrologic variabil- ity, and at decreasing the vulnerability of the economy to potential shocks.