The striker is closing in on a move to Liverpool and the Rossoneri boss believes his side could benefit, despite the loss of a "great player."
The 24-year-old is on the verge of completing a move to Liverpool, 18 months after returning to Serie A from Manchester City.
Liverpool boss Brendan Rodgers has already described the often-controversial forward as being worth the risk, but Inzaghi — though acknowledging Balotelli is a "great player" — feels his squad will improve following his departure.
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Speaking to reporters, he said: "When a player leaves, it means all the parties involved took the decision. We are certainly losing a great player, but we gain something more in team spirit and hunger. I wish Balo all the best at Liverpool."
The likes of Jackson Martinez and Alvaro Negredo are among the players rumored to be on Milan's shortlist to replace Balotelli, but Inzaghi claims he is in no rush to secure a signing and suggested Jeremy Menez could be deployed as the focal point of attack.
"The directors know what I want in the market. I have to train the players at my disposal and we have a squad up to the task. If someone else arrives, even better, but otherwise we're fine as we are," he said. "Jeremy Menez can play any of the three attacking roles and help us to use a different system. He is a versatile player who will be of great use."