* Ghana budget introduces new infrastructure fund
* Government says targets 120,000 bpd oil production in 2014
* Inflation target set at 9.5 pct for 2014, plus or minus 2 points
* Government plans to reintroduce mining windfall tax (Recasts with budget speech, reaction, quotes)
By Kwasi Kpodo and Matthew Mpoke Bigg
ACCRA, Nov 19 (Reuters) - Ghana will target economic growth of 8 percent in 2014 and will seek to trim its budget deficit to 8.5 percent of gross domestic product, Finance Minister Seth Terkper announced in an annual budget speech to parliament on Tuesday.
The government of President John Mahama is under pressure to rein in its budget deficit, which has cast a shadow over an economy growing rapidly thanks to oil exports in addition to gold and cocoa production.
The West African state is viewed as one of the continent's brightest prospects because of its stable democracy and growth. But, in a measure of fiscal problems, Terkper acknowledged Ghana would overshoot its 9 percent deficit target this year, posting a gap of 10.2 percent of GDP.
Terkper blamed this and a failure to achieve 2013 growth targets on a fall in commodity prices and an energy crisis. Officials privately say an opposition challenge to Mahama's election in December harmed the economy and scared investors.
"This budget makes proposals for programmes that will improve the lives of our people in the context of our new emerging status," Terkper said. Ghana was last year officially designated a middle-income country.
"It will definitely require some sacrifices ... but surely it will deliver the Ghana we promised," he said at the end of a combative speech frequently punctuated by jeers and heckling from members of the opposition New Patriotic Party (NPP).
His concluding words were drowned out by the eruption of rival songs and chants by NPP and ruling National Democratic Congress members of parliament.
Terkper announced a 2014 inflation target of 9.5 percent, plus or minus 2 percentage points, after the country failed to maintain inflation under 11 percent in 2013 as planned.
The figures confirmed those given to Reuters earlier by senior government officials.
One challenge facing economic managers is to convince investors that the government is taking sufficiently radical action to curb the deficit and stabilize its macro economy.
"The market impact (of the budget) is likely to be limited, with a deficit of this magnitude already priced in," said Razia Khan, head of Africa research at Standard Chartered bank.
"However, it will also contribute to the expectation that the deficit of 8.5 percent of GDP projected for 2014 may be overshot as well, unless we see a more sustained effort from the authorities aimed at curbing spending," Khan said in an email.
Fitch downgraded Ghana's sovereign rating in October to B from B+ because of concerns about government spending.
The government says it aims to reduce the deficit to 6 percent in 2015 from 11.8 percent in 2012 and has taken tough decisions this year by cutting subsidies on utilities and fuel.
Many in the nation of 25 million complain of a high cost of living and say they are not reaping benefits from a commodities-led boom. To help address that, the government will establish a Ghana Infrastructure Fund to focus on strategic projects with private and multi-lateral funds, Terkper said.
"The intention of government is to consolidate the use of such commercial financing facilities to finance projects that can repay commercial loans that the government contracts directly or guarantees," he said.
Mining and oil are the two biggest sources of public revenue and officials argue that, in the medium term, higher oil production will help alleviate fiscal challenges.
Ghana will target oil production from its offshore Jubilee field of 120,000 barrels per day (bpd) in 2014 versus an average of 102,503 bpd for the first nine months of 2013, Terkper said.
The government also plans to reintroduce a mining windfall tax bill after consultations, he said. A 2012 bill to impose a 10 percent profit tax was not considered by parliament.
In another bid to raise revenue, parliament on Friday approved an increase of 2.5 percentage points in the Value Added Tax to 15 percent, a move that drew protests from some unions.
Ghana issued a second eurobond, worth $750 million, in July that aimed to refinance debt and pay for infrastructure. Debt equalled 52 percent of GDP at end-September, Terkper said. (Editing by Ron Askew)