As drought occurrences have increased in frequency and intensity, cost-effective policies for drought adaptations are needed. The study focuses on evaluating the cost effectiveness of innovative agricultural practices and hydraulic infrastructure for the region of East Africa. A combined hydrological and system dynamics model has been developed to represent the relationships between water availability, livestock and crop production, and the socio-economic and policy aspects. The hydraulic infrastructure measures are meant to increase the overall water availability. Five different hydraulic infrastructure options were considered: sand dams, rooftop rain water harvesting tanks, ponds, shallow wells, and boreholes. The agricultural practices include drip irrigation and agroforestry that are aimed at increasing crop yields and diversifying income, thus improving population resiliency during drought period. Using the metric of cost per gained cubic meter of water and the net present value of investment, the study found that a combination of increased hydraulic infrastructure and innovative agricultural practice policy can reduce domestic water deficits by 54-100% while increasing the income per capita by up to 285% over a 10-year simulation period. It was also found that the policies have different cost-benefit distributions on various stakeholders including pastoralist, agro-pastoralists, and farmers.