The feasibility of using a bi-spectral frequency analysis method to estimate daily mean areal precipitation (MAP) from 3-hourly METEOSAT visible (VIS) and infrared (IR) images over the Blue Nile river catchment (about 35-40 o East Longitude and 8-12 o North Latitude) in support of hydrologic studies is explored. The data record used spans the period 14 July 14 August 1995. At first, the study addresses the spatiotemporal variability of the satellite images, the determination of the relationship between topography and satellite data and the inference of MAP from satellite images using the bi-spectral method and a multi-variate regression. Validation of the estimated MAPs is carried out with data from a sparse raingauge network in the region. These estimates are next used in a sensitivity study to determine the dependence of the Blue Nile region hydrologic response on the type of precipitation forcing (raingauge-based vs. satellite-based estimates). A conceptual semi-distributed hydrologic model is used to simulate hydrologic processes pertaining to soil water and channel routing with a 1x1 o resolution. Principal conclusions of this initial sensitivity study are: (a) use of the bi-spectral method, complemented with an appropriate multi-variate regression formulation, improves MAP estimates during the aforementioned time interval substantially, for daily rainfall rates greater than about 7mmday - 1 ; (b) aggregate hydrologic response of the Blue Nile region is very sensitive to the type of precipitation forcing used; and (c) substantial spatial variability of the sensitivity of hydrologic response to the type of precipitation forcing exists in the region. The use of satellite-derived MAP estimates is recommended together with recalibration of hydrologic models using spatially variable parameter values, and analysis of uncertainty propagation through model components and for various sub-catchments.