COLOMBO, March 2 (Reuters) - The Central Bank of Sri Lanka (CBSL) is expected to raise rates for the second time this year on Friday as a sharp surge in domestic inflation and a continuing foreign exchange crisis threaten to further derail the domestic economy.

Sri Lanka's forex reserves dropped to $2.36 billion as of end-January while the South Asian country's debt obligations in the remainder of 2022 stand at almost the double at $4 billion.

The median estimate in a Reuters poll of 13 economists predicts the CBSL will raise the standing deposit facility rate and the standing lending facility rate by 50 basis points each on Friday.

Ten of the 13 who expect an increase in rates were equally split on the quantum of increase with 5 predicting a 50 bps while the other half 100 bps. The decision is due at 0200 GMT.

"We are expecting inflation to skyrocket. Our worst-case scenario, which we are currently moving towards, shows that by end Q2 inflation could be 21.1%," said Dimantha Mathew, research head at First Capital.

CBSL raised rates by 50 bps at its January meeting, surprising markets, as it sought to tackle inflation that is among the highest in Asia.

Retail inflation in February reached 15.1% while food inflation hit 25.7% - the highest in a decade.

With dwindling reserves, Sri Lanka has been unable to pay for enough fuel to fire its power plants, and the country has implemented rolling power cuts of over 7 hours across the country.

Sri Lanka has so far resisted calls to seek assistance from the International Monetary Fund. But poll respondents backed debt restructuring with IMF support and floating the rupee to ease currency pressure.

They also warned sharp rate hikes may be in the pipeline if the government continues to delay steps to deal with depleting reserves and remove an unofficial peg that has kept the rupee at 200-203 against the dollar since October.

"Ideally interest rates should go up by 300 basis points. Currency must be floated but ideally it should be done with an IMF programme. As of now the debt restructuring talks have to be initiated with proper reforms without waiting till the last minute," said Dhananath Fernando analyst Advocata Institute.

For individual poll responses, see table below: