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Soil erosion decreases soil fertility of the uplands and causes siltation of lakes and reservoirs; the lakes and reservoirs in tropical monsoonal African highlands are especially affected by sedimentation. Efforts in reducing loads by designing management practices are hampered by lack of quantitative data on the relationship of erosion in the watersheds and sediment accumulation on flood plains, lakes and reservoirs. The objective of this study is to develop a prototype quantitative method for estimating sediment budget for tropical monsoon lakes with limited observational data. Four watersheds in the Lake Tana basin were selected for this study. The Parameter Efficient Distributed (PED) model that has shown to perform well in the Ethiopian highlands is used to overcome the data limitations and recreate the missing sediment fluxes. PED model parameters are calibrated using daily discharge data and the occasionally collected sediment concentration when establishing the sediment rating curves for the major rivers. The calibrated model parameters are then used to predict the sediment budget for the 1994-2009 period. Sediment retained in the lake is determined from two bathymetric surveys taken 20 years apart whereas the sediment leaving the lake is calculated based on measured discharge and observed sediment concentrations. Results show that annually on average 34 t/ha/year of sediment is removed from the gauged part of the Lake Tana watersheds. Depending on the up-scaling method from the gauged to the ungauged part, 21 to 32 t/ha/year (equivalent to 24-38 Mt/year) is transported from the upland watersheds of which 46% to 65% is retained in the flood plains and 93% to 96% is trapped on the flood plains and in the lake. Thus, only 4-7% of all sediment produced in the watersheds leaves the Lake Tana Basin.