Water scarcity is one of the problems affecting people’s livelihoods in arid and semi-arid areas, requiring a sustainable balance between water demands and water resources. This study was carried out to assess temporal and spatial distribution of water supply and demand in order to help managers to overcome water scarcity in Jiroft basin, southeastern Iran. Spatial supply and demand of water were mapped and standardized rainfall index (SPI) was used to assess drought for a 20 years period (1994–2014). Supply and demand of water were matched in 23% of the basin area, mostly concentrated in the cold zones. Water supply was reduced up to 80% during dry years, declining water supply-demand matching to 5% of the basin area. Shrub-grass rangelands and deciduous woodlands were the most valuable land covers for conservation with $ 1,100 and $ 936 per hectare water prices respectively. Water value dropped more than 72% in mismanaged ecosystems (p < 0.01). Our finding showed that water supply-demand ratio can be used as a proxy of ecosystem health and water-yield, which can provide a good information for water resources managers to reduce the threats of water scarcity in arid and semi-arid regions.