Прощай in the second meaning "forgive" is imperfective, so it is used for repeated actions; the perfective is "простить".
Example: "Прощай тех, кто будет тебя обижать." (Forgive those who will offend you).
This verb is very rarely used, compared with the word "прости", which means the same but conveys the meaning of a single action, rather than repetitive (maybe because we rarely ask people to do it several times or to get a habit of forgiving people).
So, notes of usage:
1. It's all about context. If a context involves offenders, this word usually means "forgive", otherwise "gb forever".
2. If you see "прощай", 9 out of 10 times it will mean "farewell".
3. Once it's imperfective, you just should memorize it as a form of the "прощать" verb (forgive) rather than "прощаться" (farewell).
4. Btw "прощай(те)" is a nonstandard usage of the verb "прощаться" as the reflexive ending "ся" is dropped.