This study used crop budgets to assess the impact of declining groundwater levels on the economic value of irrigation water in the Wadi Zabid region of Yemen. The study found that returns to land and water were highly sensitive to changes in groundwater depths over time and the free availability of spate water for irrigation. Crops differed in the amounts of irrigation water applied and in their returns to land and water. Banana had the highest irrigation requirement, but also delivered the highest return to land. Banana’s return to water was greater than that of date palm and feed sorghum, but lower than that of mango and food sorghum.