Egypt is to unveil a major extension of the Suez Canal that President Abdel-Fattah el-Sissi has billed as an historic achievement that will boost the economy following years of unrest.

An elaborate ceremony due later on Thursday in the Suez Canal city of Ismailia will be hosted by the president and attended by foreign dignitaries.

The unveiling of the $8.5 billion extension has been trumpeted as a historic achievement by pro-government media and has revived the nationalistic personality cult built around the 60-year-old el-Sissi.

But the ceremony will be overshadowed by an Islamic State affiliate's threat to kill a Croatian hostage kidnapped on the outskirts of Cairo last month, a grim reminder of the threat posed by Islamic militants to Egypt's stability.