Shadow water, a term introduced to the water literature in this paper, is shown to be a crucial component of the supply side of the population–water resources equation in water-strained countries and helps keep this equation in a state of equilibrium.

A virtual environment is imagined in order to compute the water demand for the country under consideration, enabling the subject country to produce all the commodities it needs. The water demand is thus calculated in a virtual plane and is transformed to the real plane in the calculation process. The demand for each of the three purposes considered (municipal, industrial and agricultural) is determined. The blue water equivalent of green water, responsible for the support of rain-fed agriculture and range land, is calculated and added to the other agricultural water resources of blue and grey water.

The demand generated by the uses as determined in the virtual model is compared with the available supply. The gap between the supply of and the demand for production water (agricultural and industrial) is bridged by shadow water through commodity imports.