Modeling of groundwater budget provides basic information for water resource protection, management, and development in Modjo River catchment. Hydrology information such as rainfall and evaporation were collected from the National Metrological Agency. Pumping well location, pumping rate and aquifer thickness were obtained from the Oromia water works supervision and constructions. In this study, steady-state groundwater flow model was constructed and calibrated to evaluate changes in groundwater budget under scenario of increased groundwater withdrawals and decreased recharge rates. The result of steady-state model shows that, the direction of groundwater flow is from the North (highland area) to the south (rift floor) and coincides with the direction of stream flow in the study area. Increasing the current withdrawal from the aquifer by 20% resulted in reductions of base flow by 11.1%, subsurface outflow by 2.2% and average water level by 2.78 m (with a maximum of 21.1 m and a minimum value of 0.2 m around vicinity of lakes at Bushoftu air force well). Increasing the current withdraw from the aquifer by 40% resulted in reductions of base by 21.7%, subsurface outflow by 4.54% and average water level by 5.16 m (with a maximum of 24.24 m and a minimum value of 1.13 m around vicinity of lakes in Bushoftu air force well). Similarly, increasing withdrawal by 50% resulted in reduction of base flow by 53,359 m3/day, which is about 27% of the base flow under calibrated steady state mode. The scenario reduced recharge by 25% was investigated and the heads calculated for this scenario shows a maximum decline of the water level by 14.18 m and a minimum of 1.37 m (around vicinity of lake in Bushoftu Air force well) in the catchment In conclusion, increase in groundwater withdrawal and decrease in recharge in the study area will have a negative impact on surface water, downstream groundwater dependent ecosystem and causes an environmental problem in general.