Persad-Bissessar beat Panday in 2010 to take over the leadership of the party and later united the opposition and won the general election that Patrick Manning called years ahead of schedule.
She told reporters Panday remains a member of the party and it is his democratic right to contest the election.
"He is entitled do so. I see no difficulty with that whatsoever. The electorate will decide. Mr Panday is welcome to contest any elections. We live in a democratic country," she said.
The Prime Minister was reacting to Panday's statement earlier in the day that he would lead a slate of candidates in the UNC's internal election in march 2012 to "take back" the party.
Panday claimed that the party is not following its founding principles and is not providing proper representation. He said he has been "inundated" with calls to get back involved. However he said he wants to office and will act only in an advisory capacity.
Persad-Bissessar spoke with reporters in Mayaro at a sod turning ceremony for a new fire station.
Persad-Bissessar spoke with reporters in Mayaro at a sod turning ceremony for a new fire station.
She also told reporters that Thursday's cabinet meeting will be held in Tobago.
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