Incoming ssh connections blocked

Incoming ssh connections blocked

Hi some time back I asked this question and made a lot of changes to
secure my system. Now I need to make a dummy account and give ssh access
of this account to a friend. But I am unable to receive any incoming ssh
connections. I can ssh to any server via my computer but can not ssh to
even localhost. I am sure its due to some settings I changed in a bid to
make my system more secure but know I don't remember those changes.
For one, I have disabled ufw. Also there is nothing blocking any user in
/etc/ssh/sshd_config or in /etc/hosts.allow or /etc/hosts.deny.
I have attached the output of ssh -v localhost here. I narrowed down the
problem to debug1: SSH2_MSG_SERVICE_ACCEPT received by comparing my output
with this output on a friend's computer.
Any help is appreciated.