Quantification of fluxes of water into and out of terminal lakes like Basaka has fundamental challenges. This is due to the fact that accurate measurement and quantification of most of the parameters of a lake's hydrologic cycle are difficult. Furthermore, quantitative understanding of the hydrologic systems and hence, the data-intensive modelling is difficult in developing countries like Ethiopia due to limitation of sufficient recorded data. Therefore, formulation of a conceptual water balance model is extremely important as it presents a convenient analytical tool with simplified assumptions to simulate the magnitude of unknown fluxes. In the current study, a conceptual lake water balance model was systematically formulated, solved, calibrated, and validated successfully. Then, the surface water and groundwater interaction was quantified, and a mathematical relationship developed. The overall agreement between the observed and simulated lake stage at monthly time step was confirmed based on the standard performance parameters (R(2), MAE, RMSE, E(f)). The result showed that hydrological water balance of the lake is dominated by the groundwater (GW) component. The net GW flux in recent period (post-2000s) accounts about 56% of the total water inflow. Hence, GW plays a leading role in the hydrodynamics and existence of Lake Basaka and is mostly responsible for the expansion of the lake. Thus, identification of the potential sources/causes for the GW flux plays a leading role in order to limit the further expansion of the lake. Measurement of GW movement and exchange in the area is a high priority for future research.