Ethiopia is facing looming climate changes in combination with steep population growth, with potentially a great impact on its food and water security. In this study we determine the expected effect of climate change on crop production, explore the potentials of crop production at different productivity levels, and link each production level to its potential impact on water demand and on the national water discharge. We find that the effect of climate change on actual yields is expected to be limited due to the projected annual rainfall increase. In addition, we find that crop productivity can be largely increased without the need for widespread irrigation, as crop management, rather than water availability, seems to be the main bottleneck towards higher crop yields. Due to the projected rainfall increase and the higher water use efficiency, increasing yields to rainfed potential levels could be achieved without decreasing the country's net water discharge.