The Cabinet has approved the establishment of Mathari National Teaching and Referral Hospital.
This follows a Cabinet Meeting chaired by President Uhuru Kenyatta at State house on Thursday.
As a result, the meeting also approved establishment of the Gilgil Hospital as a satellite mental health facility of Mathari.
Mathari Hospital has been the only public psychiatric hospital in Kenya for decades.
With a capacity to admit 675 patients, the facility is located near the slum area of Mathare constituency.
In the same meeting, the President directed the Ministry of Health to establish a task force on the status of mental health in the country and come up with new policies needed to address the growing concerns about mental health among Kenyans
The findings of the task force which will be discussed in Cabinet within 90 days will assist the government in the allocation of resources to mental health.
The Cabinet approved a number of policies focused on boosting the country’s economy including the Kenya Youth Development Policy (KYDP) 2019, which seeks to mainstream issues affecting the youth.
The meeting also attended by Deputy President William Ruto saw approval of policies seeking to coordinate youth programmes to address unemployment, radicalisation, youth exclusion, cyber crime and trafficking in persons among other challenges facing the youth.
The meeting further saw approval of the Business Laws (Amendment) Bill 2019.
The amendments are aimed at improving business environment in the country to attract more investments and accelerate economic growth as well as raise the country's ranking in the World Bank Ease of Doing Business Index to position 50 by 2020.
Among the statutes identified for amendment include the Law of Contract Act, the Industrial Training Act, the Registration of Documents Act, the Survey Act, the Stamp Duty Act, the Kenya Information and Communications Act and the National Construction Authority Act.
Others are the Occupational Safety and Health Act, the Land Registration Act, the Business Registration Act, the Companies Act and the Insolvency Act.